The parent Google alphabet (NASDAQ:) is expected to report its fourth quarter results on Tuesday, Feb. 1, after the close. Analysts expect earnings per share of $27.78 on revenue of $72.19 billion.
If these expectations become reality, GOOG will have extended both measures of the past year. In the fourth quarter of 2020, the tech giant posted earnings per share of $22.3 on revenue of $56.9 billion, with both numbers exceeding expectations at the time.
Alphabet has racked up a string of gains on both metrics, dating back to when the market bottomed out in March 2020. The April 2020 results were the last time the company missed out on profits. It's likely that if the company beats again tomorrow, the focus will be on the tech giant's cloud platform, a key part of the company's continued growth.
Yet the company's stock has been under pressure in the past month from the recent sell-off in the technology sector, so GOOG shares have fallen more than 8% this year. The stock, which closed Friday at $2,665.79, is down 11.6% from its all-time high on Nov. 18 after recovering from the low in that sell-off, above $2,530 on Jan. 4% fell – well into correction territory.
Are stocks now within reach for a buying opportunity?
The stock has gone through a series of bearish highs and lows, creating a short-term downtrend as it fell below 200 DMA for the first time since early April 2020. Also, the 50 DMA dipped just below 100 DMA as current pricing weakened compared to previous levels.
Finally, the price has formed a broadening pattern, which could be the precursor to a top. The higher tops and lower tops pattern marks the inconsistency of the previous trend. So far it looks bearish though.
On the other hand, the price may have found support at the nexus of a declining trendline since the August 3 low and the upward trendline since the March 2020 bottom.
Also, the declining trendline, or the bottom of the broadening pattern, may provide support even if the price eventually moves forward. Finally, the RSI slid to the steeply oversold level of 23.94, the lowest for this stock ever recorded, in 2014. Such stretched momentum could act like a taut elastic, causing the stock to bounce back. So, how should traders proceed?
Trading Strategies
Conservative traders should go long on new highs or go short if the long-term peaks and troughs reverse below the upline
Average traders would take a long position after the price closes and retest the 200 DMA.
Aggressive traders can now go long on a trading plan that suits their needs. These are the essentials for money management:
Trade example – Long position
Admission: $2,600
Stop Loss: $2,500
Risk: $100
Target: $2,900
Reward: $300
Risk Reward Ratio: 1:3
