Trading the Google Earnings Report – Part I

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.

30-minutes bar chart of the Nasdaq 100 index with Elliott wave labels
Leading diagonal followed by a flat correction then entering the current impulsive decline – it might be a bull flag but very likely not going to be complete by Thursday
The Nasdaq quarterly and the monthly bar chart’s trend is bullish, but the weekly trend is pulling back along the lines I sketched on the 30-minutes timeframe. The pullback does not seem complete, but just about to decelerate right at, or before, the Fibonacci confluence target zone of 3,746-3,733. By the time of the earning release on Thursday, the market picture might be just turning into a range market and will not be able to reverse the bear side of the larger cycle yet.
This is one vote on the negative side. The broader market trend might be governed by indecision the following days when breakouts don’t get the follow through.

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.

About Laszlo Nagyferenczi

Laszlo Nagyferenczi is a day trader, analyst and instructor as well as the creator of the proprietary Context-Momentum-Signal concept. He has authored over 200 blog articles about his unique approach to trading and the Elliott Wave Theory. His clients appreciate his ability to go from the theoretical to the practical i.e. all the way to the actual trade set ups. Originally hailing from Hungary, Laszlo is fluent in English and Hungarian with a long list of education credentials including BA in Economics, Certified Elliott Wave Analyst (CEWA), Certified Adult Educator for T-Groups, Professional Co-Active Coach (PCC) at CTI. The real education, though, has been the trial by fire in the markets, with real capital at risk.

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