Google parent Alphabet (NASDAQ:GOOG) is scheduled to report Q4 results on Tuesday, Feb. 1 after the close. Analysts expect an EPS of $27.78, on $72.19 billion in revenue.
Should these expectations materialize, GOOG will have expanded on both measures from the same quarter last year. During the fourth quarter of 2020, the tech giant posted an EPS of $22.3 on revenue of $56.9 billion—with both figures beating expectations at the time.
Alphabet has enjoyed a string of earnings beats on both metrics, going back to when the market bottomed in March 2020. April 2020's results were the last time the company missed on EPS. It's likely if the company does beat again tomorrow, the focus will be on the tech giant's cloud platform, a primary component in the company's ongoing growth.
Still, during the past month, the company's shares have been pressured by the recent tech sector selloff, so that GOOG shares are off more than 8% this year. The stock, which closed Friday at $2,665.79, is down 11.6% from its Nov. 18 record high, having rebounded from its lowest point in that selloff, above $2,530 on Jan. 24, when it was down 16.4%—well into correction territory.
Are shares now in range for a buying opportunity?
The stock has posted a series of descending peaks and troughs, establishing a short-term downtrend while falling below the 200 DMA for the first time since rising above it in early April 2020. Also, the 50 DMA just dipped below the 100 DMA, as current pricing weakened compared to previous levels.
Finally, the price has formed a Broadening Pattern, which could be the precursor of a top. The pattern with higher highs and lower lows marks the inconsistency of the previous trend. So far, however, it looks bearish.
On the other hand, the price may have found support at the nexus of a falling trendline since the Aug. 3 low and the uptrend line since the March 2020 bottom.
Also, the falling trendline, or the bottom of the Broadening Pattern, may be support, even if ultimately the price goes through. Finally, the RSI dropped to the highly oversold level of 23.94, the lowest for this stock on record, back in 2014. Such stretched momentum could act as a tautly pulled rubber band, causing the stock to spring back. So, how should traders proceed?
Trading Strategies
Conservative traders should go long on new highs or short if the long-term peaks and troughs reverse underneath the uptrend line.
Moderate traders would enter a long position after the price closes and retests the 200 DMA.
Aggressive traders could go long now, according to a trading plan that suits their needs. Here are the essential points for money management:
Trade Sample – Long Position
- Entry: $2,600
- Stop-Loss: $2,500
- Risk: $100
- Target: $2,900
- Reward: $300
- Risk-Reward Ratio: 1:3