This week, earnings reports are heating up, starting with Alphabet on Wednesday. Last time, Alphabet exceeded earnings expectations, but its stock fell from $165 to $147.84 over market share worries. Since then, the stock has bounced back by 27.5%, closing today at $188.61, the highest level since February 7. Its peak was $207.05 on February 5. In technical analysis, Alphabet’s stock is above the 50-hour, 100-hour, and 200-hour moving averages at $182.71, $179.63, and $176.59, respectively. If the stock falls below the 50-hour MA, it could decline by about 3.25%. Dropping past the 100-hour MA suggests a near 5% drop, while the 200-hour MA indicates a potential 6.5% decrease. Analysts expect earnings per share (EPS) to be $2.17, which is a 14.81% increase from last year, with revenues growing by 10.8% to $93.91 billion.

Key Earnings Releases

So far, the stock has stayed mostly flat for the year, closing at $189.30 in 2024. Key earnings releases this week include NXP Semiconductors, Lockheed Martin, Coca-Cola, and Tesla. Other companies like IBM, Chipotle, and Intel are also reporting, representing a wide variety of sectors. This week’s busy earnings calendar, especially with GOOGL and TSLA reports, could lead to significant market fluctuations. We remember the last sell-off after Alphabet’s earnings, which happened despite positive results. This suggests that strong numbers might not be enough if concerns about AI competition aren’t handled well. Given this uncertainty, we are exploring options strategies to benefit from possible large price swings in either direction. The technical levels, such as the 50-hour moving average near $182 and the 100-hour MA around $179, are excellent targets for put option strike prices. A break below these levels could lead to quick profits for bearish positions. Data indicates that the options market expects about a 5.5% move for GOOGL after its report, which lines up well with potential declines to the 100 or 200-hour moving averages. This market gap suggests traders are preparing for a major reaction, making strategies like buying a straddle or strangle attractive. This allows us to profit if the stock rises to its all-time high or falls below key support levels.

Market Reactions and Strategy

This strategy applies not just to Alphabet; the report from the electric vehicle maker on the same day is also expected to impact the market significantly. We’re finding similar opportunities in other volatile stocks, such as INTC and CMG, where earnings surprises can lead to big movements. A disappointing report from any of these major companies could affect the entire Nasdaq 100 index. We must also be ready for a positive outcome, as the stock has surged ahead of this report. If the company shows strong growth in its cloud division and addresses AI market share concerns, it could move toward the all-time high near $207. In this case, holding call options or the profitable part of a strangle would be wise. After the earnings are released, we’ll closely watch how the price reacts around those key moving averages. A clear break and hold below the 200-hour MA at $176.59 would indicate that sellers are in control, boosting our confidence in bearish positions with the next target around the retracement level of $171.89. Create your live VT Markets account and start trading now.

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