Good morning fellow traders,
Yesterday, we had our 4th day up in the Nasdaq after the January sell-off. This was a great opportunity to reduce risk and remain tactical ahead of more earnings reports. The indices struggled early in the day to hold on to gains. $GOOGL was the perfect example. After making a new all time high at $3030 it drifted lower and ended the day almost 100 points below. $AAPL and $MSFT held in better than most as their earnings reports are already behind them. We managed to take advantage of $GOOGL’s impressive gap up and sold our $2700/2800 call spreads for the maximum profit of $8500 per contract.
After the closing bell, $FB reported earnings and took a nosedive. $FB continues to struggle with $AAPL’s new privacy policy and its investments in the metaverse. Guidance was very poor and for the moment Meta will go in the penalty box. People seem to be less interested in spending time or money on their platforms and this took an important toll on their financial results.
$QQQ dropped as much as 8 points on news of the report and are looking to open around $360-362 this morning. For today, our focus will be on $GOOGL to see if it can begin an active sequence and defend its earnings gap around $2910. See if $FB, which dropped as much as 20% last night remains heavy throughout the day, or does it post the lows in the first hour of trading. These stocks will be important barometers of the overall market sentiment.
We remain cautious going forward and prefer to book trades earlier rather than later given the strong headwinds: inflation, tightening FED policies and supply chain constraints. The recent bounce in the overall market needs to prove that it has been anything more than an oversold one. If, today, we lose important support levels, we believe that the path of least resistance will be to the downside as we progress into February.
$QQQ chart
The tech sector had an impressive rally up to $370. For today, see if $358-360 holds as this is an important support area. If $FB get slaughtered and $AMZN comes in weaker than expected tonight, we believe that the lows of the year will be re-tested soon. For better action, see if $363 (the 200EMA) gets reclaimed. $AAPL, $MSFT and $GOOGL need to do the heavy lifting today in order for the tech sector not to fall apart.
https://www.tradingview.com/x/aahc2OOD/
$GOOGL chart
$GOOGL had a stellar quarter and announced a surprise stock split (20-1). It gapped up 250 points but started to lose steam mid-day. For today, see if $2910 holds in order to build above the earnings gap. $2970-90 is the first resistance area in case tech gets a bid. Ad money is definitely moving away from social media companies to Alphabet but, keep in mind that market sentiment can be more important than the financial reality in the present.
https://www.tradingview.com/x/jFqQqqwE/
$AAPL chart
$AAPL has built a bull flag above the moving averages. For today, as long as it holds above $172.5 we intend to remain long and buy a dip. It is one of the few tech stocks above all moving averages which already reported. Its earnings and guidance were impressive and investors will look for ‘safer’ stocks should the bears shake the tree again. The first resistance area is $177.
https://www.tradingview.com/x/JVxjeE0g/
$AMZN reports after the closing bell tonight. It had 2 poor quarters coming into tonight’s report. It desperately needs to beat on estimates and have strong guidance for the next quarter. A stock split would be one solution to take this stock out of its recent downtrend. If $AMZN misses and does not indicate a stock split, we strongly believe that the January lows will be broken and $AMZN will no longer be the ‘best investment’ of 2022 as many analysts have predicted. Keep in mind that $AMZN dropped 100 points just on $FB report last night. We are long some call spreads for the earnings but will look to hedge by buying some put options ahead of the report.
We Grow Together!