Alphabet's ability to keep it going, considering the stock's chart, simply depends on how Monday night's release is perceived.
Forget the fact that Alphabet (GOOGL) dropped out of the "winner takes all" competition for the Department of Defense cloud computing program known as "JEDI."
Forget about Marine Corps General Joseph Dunford's comments regarding Alphabet's efforts in the field of artificial intelligence and Google's relationship with China.
Forget that Acting Defense Secretary Patrick Shanahan mentioned in a Senate hearing that Google has expressed in the past a "lack of willingness" to support Defense Department programs.
Is the stock a good investment? That's what you want to know.
Ring the Bell
After the close of business on Monday, Alphabet will report its first-quarter results. I have seen most expectations for EPS in the $10.50's, though there a few out there that are well enough below that. Perhaps that is due to many of these projections not being revised after the announcement of the European Commission's $1.7 billion fine for as the commission alleges... forcing AdSense customers to sign contracts prohibiting the placing of advertising with competing search engines. Alphabet intends to accrue for the entire fine this quarter in order to comply with accounting rules.
This is a drop in the bucket really, when measured against quarterly revenue expected to print in the neighborhood of $37.34 billion, which if realized will be year-over-year growth of 19.9%. The focus, I believe, will be on performance for the Google Cloud, after very strong execution for the quarter from competitors Microsoft (MSFT) Azure, and Amazon (AMZN) AWS.
Investors also want to see advertising growth, not just at the search engine, which should face margin pressure, but at YouTube as well. Has Alphabet held its own as the likes of Amazon and Facebook (FB) have performed very well in that space?
In addition, there will need to be increases at Google Maps, and Google Play. It would also be nice to hear detail on the highly valued Waymo autonomous vehicle program, and Stadia, Google's answer to the future of gaming -- a cloud-based infrastructure.
Is GOOGL poised for a break out?
The truth is that GOOGL broke out about two weeks ago, when the shares soared past the $1,230s where the handle to a cup was formed, in response to that golden cross.
Can it keep going, even with an obviously overbought reading for Relative Strength? That simply depends on how Monday night's release is perceived. Remember, Alphabet doesn't really do quarterly guidance. So, it will be a little tougher to gauge.
The fact is that if I were long this name, my price target would be at least $1,450. The best way to play this might just be in a smaller-size equity position.
For traders adept at the use of options, going long a one contract straddle expiring this Friday will cost you roughly $45. You want to count on a $45 move in the shares from strike just to break-even? Me neither.
A more risk-averse way to go about this would be to use thus bullish example here, but it does work in reverse if you are bearish.
A bullish trader could...
-- Purchase one GOOGL May 3 $1,280 call (value: $22.00).
-- Sell one GOOGL May 3 $1,300 call (value: $12.80).
Note: This is still going to be costly if the shares go the wrong way, but at least the loss is controlled. The profit unfortunately is also capped. The trader in this example would be risking $920 in an effort to win back up to $2,000.