Investment banking and wealth management giant Morgan Stanley (MS) beat earnings estimates before the opening bell on Thursday, July 18. The stock opened lower but held its 200-day simple moving average at $43.49. Stabilization was helped by its semiannual pivot at $43.82.

Morgan Stanley shares closed the first half of 2019 at $43.81 on June 28, which became a key input to my proprietary analytics. The only level left over from the first half is its annual pivot, now a value level at $41.73, which has been a magnet since Jan. 7. The stock most recently crossed above this level on June 4.

Morgan Stanley is trading around its second half pivot at $43.82. Its value level for July is $40.36, with its third quarter risky level at $48.34. The daily chart shows that the stock is in a trading range. The weekly chart shows that the stock must close Friday above its five-week modified moving average at $43.95 to remain positive. Fundamentally, Morgan Stanley is reasonably priced, with a P/E ratio of 9.81 and a dividend yield of 2.70%, according to Macrotrends.

In the long term, Morgan Stanley is consolidating a bear market decline of 38% from its all-time intraday high of $59.38 set during the week of March 16, 2018, to its Dec. 24 low of $36.74. The stock has posted a gain of 11.2% year to date and is up 19.1% since its Dec. 24 low. However, the stock is also in correction territory at 15% below its 52-week high of $51.50 set a year ago on July 18, 2018.

Morgan Stanley is one of the primary dealers that have business relationships with the New York Federal Reserve Open Market Trading Desk, so they put their firms' capital at risk as underwriters of new U.S. Treasuries.

The daily chart for Morgan Stanley

Daily chart showing the share price performance of Morgan Stanley (MS)
Refinitiv XENITH

The daily chart for Morgan Stanley shows that the stock is in a trading range between its monthly value level at $40.36 and its quarterly risky level at $48.34. In between is the annual pivot at $41.73 and the semiannual pivot at $43.82.

The 50-day and 200-day simple moving averages are $43.49 and $43.49, converging at the same price. This puts the stock on the cusp of a failed "golden cross," with a "death cross" possible in the case of a gap below these averages. The bottom line is just to trade the range.

The weekly chart for Morgan Stanley

Weekly chart showing the share price performance of Morgan Stanley (MS)
Refinitiv XENITH

The weekly chart for Morgan Stanley shows that the stock needs to close Friday, July 19, above its five-week modified moving average of $43.95 to remain positive. The stock is above its 200-week simple moving average, or "reversion to the mean," at $41.53, last tested during the week of June 7. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week rising to 42.55, up from 40.38 on July 12.

Trading strategy: Buy Morgan Stanley stock on weakness to its annual and monthly value levels at $41.73 and $40.36, respectively, and reduce holdings on strength to the quarterly risky level at $48.34. The semiannual pivot at $43.82 will likely remain a magnet.

How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, most recently on June 28. The quarterly level was also changed at the end of June.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.