The market recovery hit maximum velocity last week. And what do traders have to thank for the sharp acceleration?
Earnings. Earnings of tech stocks, in particular. The fireworks sent the tech heavy Nasdaq Composite higher by a whopping 4.9% on Thursday and Friday alone.
At $112 and change, the PowerShares QQQ Trust (QQQ) — a trader go-to that’s heavy in tech stocks — is a mere pebble toss from new highs for the years. The prior closing high from mid-July was $113.98, or 1% away. Further buttressing the bulls’ case is the fact that the QQQ sits above all major moving averages. Virtually every major potential overhead resistance level heaped on tech stocks thanks to the August meltdown has now been left in the dust.
As the earnings beat rolls on, further upside surprise may lie in wait for investors. For now, keep an eye on these three tech stocks that just delivered earnings blowouts to the Street.
3 Tech Stocks, 3 Earnings Blowouts to Trade: Alphabet Inc (GOOG, GOOGL)
Topping our list of tech stock earnings blowouts is Alphabet Inc (GOOG, GOOGL). The king of search jumped 10% right out of the gate Friday following an earnings announcement that trounced Wall Street’s estimates. GOOGL generated $7.35 earnings per share versus an expected $5.87. The initial 10% up-gap was a virtual repeat of last quarter’s post-earnings reaction.
Unlike last quarter, however, GOOGL stock’s gap on Friday was sold into with abandon. Profit taking sent shares lower throughout the trading session, essentially cutting the days gains in half.
Would-be buyers should be eyeing the dip with interest. Keep an eye on the $700 level as well as the gap fill zone near $680. Both price levels are high potential spots for dip buyers to strike.
Should either level end up providing support, consider buying the Jan $680 calls to exploit further upside in GOOGL stock over the coming quarter.
3 Tech Stocks, 3 Earnings Blowouts to Trade: Amazon (AMZN)
Amazon (AMZN) followed in GOOGL stock’s footsteps by gapping higher an eerily similar 10%. And, like its tech counterpart, AMZN stock also fell prey to profit taking throughout the day causing the tech titan to give back a third of its gains.
AMZN scored 17 cents in earnings per share versus an expected 9 cent loss.
Should AMZN stock mimic its behavior following last quarter’s earnings gap, we will probably see some backing and filling before Amazon’s uptrend continues. Last quarter’s earnings gap did eventually fill at one point (late August), and that ended up being the best buying opportunity for the quarter.
Be on the lookout for a similar opportunity in the coming weeks.
Snatch up the Jan $560 calls on any type of support bounce in the $570 area.
3 Tech Stocks, 3 Earnings Blowouts to Trade: Microsoft (MSFT)
Rounding out our trio of tech stocks is Microsoft (MSFT). The sultan of software soared 10% on Friday in one of its biggest earnings gaps in recent history.
Microsoft generated 67 cents earnings per share versus an expected 58 cents.
Long-term shareholders of MSFT stock will be happy to know their beloved shares are fast approaching the prior peak around $60 that was reached at the height of the dot-com bubble in late 1999. While MSFT is firing on all cylinders, it’s tough to chase such a large stock that’s already gained 10%. Heck, if you add on the pre-earnings rally that kicked off at the beginning of October, MSFT stock is up about 20%.
The logical level to watch on any type of pullback is $50. This prior resistance has a good chance of providing support.
Buy the Jan $50 calls on Microsoft’s next price dip.