Google, Inc. (GOOG) is set to release its quarterly earnings report after the bell today. Although the price of GOOG is higher than the preferred range of most of our readers, knowing how the ”bellwethers” perform can still be informative in gauging potential moves in the market. Along those lines, technology can tend to lead the way. Tech stocks worth watching during earnings season might be AAPL, IBM, AMZN, and of course, GOOG.
The release of GOOG’s last earnings report in April resulted in a severe drop in the stock price and a trend lower that continued until June. The stock has since rallied nicely, but is the rally over? This quarter’s estimates for GOOG have been lowered. So, if GOOG has been expected to beat these lowered estimates, could that good news have already been discounted over the last month? Or could a positive surprise send the stock higher?
Below is a 1 yr. chart of GOOG (Google, Inc.) with my added notations:
The chart of GOOG is very simple: The $550 level is the key price to watch tomorrow. As can commonly happen with stocks, GOOG has rallied into earnings up to an important level. You can see how just as recently as last week GOOG tested the $550 level again as resistance. Will a strong earnings report give GOOG the lift it needs to break higher?
The Tale of the Tape: GOOG releases its quarterly earnings report after the bell today and the $550 level is the price to watch. If GOOG can break above $550, and hold that level, GOOG should be moving higher, thus a long position could be entered. If the stock breaks significantly higher, waiting for a possible pullback to $550 would provide a better, lower risk entry point. Either way, a stop below the $550 level would be recommended. On the other hand, if GOOG tests $550 tomorrow, but cannot hold, a short position might be entered with a stop above the $550 level.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT