Look to Short Alphabet Inc (GOOGL) Stock After Q1 Earnings

Advertisement

googl stock - Look to Short Alphabet Inc (GOOGL) Stock After Q1 Earnings

Today marks a big day for U.S. large-cap technology stocks, and Google parent Alphabet Inc (NASDAQ:GOOGL) will be among the companies at center stage. Year-to-date, GOOGL stock is about 12% higher, and it marginally pushed to fresh all-time intraday highs Wednesday just ahead of Thursday’s Q1 earnings report.

Beat the Bell: Alphabet Inc. (GOOGL)Some traders say momentum is on Alphabet’s side. Others say the upside momo is exhausted. I see a better trading opportunity likely arising on Friday, April 28, once the initial reaction to the earnings news has run its course.

But before we look at the possible trade setups in GOOGL, let me be clear that I’m a long-term believer in Alphabet as a continuing growth story and innovator in technology. As such, any trade ideas for the near- to intermediate-term, whether long or short, should be considered separate from a longer-term bullish view.

When I last discussed Alphabet stock on March 8, I pointed to a bullish setup in which the stock was coiling up for a pop. I gave a near-term upside target in the $870-$880 range. Seven trading days later, the stock traded as high as $874, tagging the middle of my upside target range, where at least partial profit taking was in order.

And, as I discussed yesterday, what GOOGL does — along with Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT) and other big tech names reporting tonight — should have a lot of pull on the Nasdaq-100 and other large stock indices.

Now, we look at the charts, and look ahead.

GOOGL Stock Charts

On the multiyear chart, we see that Alphabet still is ascending at an impressive rate and thus in a steep (and steepening) slope. The rally over the past two weeks has once again brought the stock back to the very upper end of its ascending wedge-like formation (purple dotted lines).

GOOGL stock chart weekly view
Click to Enlarge

From where I sit, it’s difficult to imagine much more sustainable upside from here. At least not before GOOGL stock settles into a new consolidation period.

On the daily chart, we see that the 7% rally over the past two weeks has pushed GOOGL shares not only to the upper end of the bigger-picture uptrend, but also to the upper end of the multiquarter trend.

GOOGL stock chart weekly view
Click to Enlarge

The options market is currently pricing in about a $27-$30 move following Thursday’s earnings report. Based upon Wednesday’s closing price around the $890 mark, we could see shares trading as high as $920 or as low as $860 after earnings. (Assuming the options market has this priced correctly.)

The $900 area may offer a psychological area of technical resistance. That is, a sustainable move above $900 — even if the stock blasted through this level in an immediate-term post-earnings reaction — might prove unlikely.

My focus after earnings will be to “fade” or “short any up-gap in GOOGL stock, particularly should it trade into the $910-$920 area.

Alternatively, if the stock were to trade lower after earnings, it may provide an opportunity to sell out-of-the-money spreads and see the stock fall back toward the mid- to lower $800s.

Like what you see? Sign up for our daily Beat the Bell e-letter and get Serge’s investment advice delivered to your inbox every morning! You can also download his 6 Keys for Successful Trading and Investing.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2017/04/look-to-short-alphabet-inc-googl-stock-after-q1-earnings/.

©2024 InvestorPlace Media, LLC