Alphabet, Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) will print its second-quarter earnings after the bell on Tuesday. The stock was falling over 2% lower heading into the event and has dropped almost 7% since starting to trade on a 20-1 split adjust basis on July 18.
In the trading session following Google’s rare first-quarter earnings miss, the stock gapped down over 6% but shot up 4.41% on the subsequent day. For that quarter, Alphabet reported EPS of $24.62, missing the $26.11 estimate and sales of $68.01 billion, which slightly beat the $68.00 billion estimate.
For the second quarter, the consensus estimate for Google’s earnings per share comes in at $1.31 on revenues of $70.35 billion.
KeyBanc Capital Markets’ analyst Justin Patterson cut the price target for Alphabet on Tuesday from $153.75 to $125.
Traders will be watching closely to see how Alphabet reacts in the after-market trading session. Holding a position in a stock over earnings, especially for options traders who must consider "premium burn," is risky because a stock can drop following an earnings beat and rise following a loss.
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The Alphabet Chart: On Tuesday, Alphabet broke bearishly down from a rising channel pattern, which the stock had been trading in since May 25. When a stock breaks down from a rising channel it can indicate a longer-term downtrend is on the horizon, but due to Alphabet’s earnings print coming up after the bell and the fact that the drop came on lower-than-average volume, there’s a chance the stock could rebound.
- The fall confirmed Alphabet is trading in a downtrend, with the most recent lower high printed on July 20 and $116.33 and the most recent confirmed lower low formed at the $109.30 mark on July 13. On Monday, Alphabet confirmed the trend was intact by falling under the most recent lower low.
- Eventually, Alphabet will bounce up to print, at least, another lower high. Traders and investors can watch for the stock to print a reversal candlestick, such as a doji or hammer candlestick, which could indicate the bounce is on the way.
- If Alphabet suffers a bearish reaction to its earnings print, there’s a gap that still exists between $97.79 and $100.10 that is likely to fill. The gap was left behind on Feb. 3, 2021.
- Bullish traders would like to see Alphabet jump back up into the rising channel following its earnings print, which could indicate Tuesday’s bearish price action was a bear trap.
- Alphabet has resistance above at $106.53 and $111.50 and support below at $101.88 and $97.79.
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