Google (GOOG and GOOGL) will report third-quarter results on Thursday amid overall market weakness. As it often happens when evaluating individual stocks, the earnings data release is a junction point in terms of technical state of the chart and the fundamental background.
The earning report looks back in time, therefore, it’s just a reflection of the past and often does not rhyme with the present tendencies. Do not attempt to make trading decisions based solely on fundamentals. Why? Because it is better not to try to drive your car exclusively looking in the rear-view mirror, if you know what I mean.
But, it is also a mistake to ignore these fundamental events, as they can confirm the technical picture.
How do we balance between technicals and fundamentals and between past and present? Well, my personal approach is to separate them. Here is my four-step process of trading earnings releases. Today, we’ll discuss the first step, and we’ll cover the remaining three in part II of this article.
STEP 1: Evaluating the current market trend of a relevant index
Studying the NASDAQ-100 Index is an obvious choice for Google, as it is composed of the largest domestic and international non-financial companies listed on the Nasdaq. We would like to find clues on the index chart to determine the potential impact of the general social mood on any kind of earning result. Positive earning reactions get further in a positive environment and negatives in bearish market situations.
The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.