One again, Google (GOOG) put out a stellar earnings report, and again the market essentially yawned. After GOOG's last earnings report, I noted that it now seemed to make more sense to sell options rather than buy them if you want to gunsling in advance of GOOG's reports. GOOG gapped up "only" 3.8% at the open on April 20 and was practically all downhill from there for a 2.3% close. Such small moves mean that only in-the-money calls will make money and all puts will lose a lot of money. For options sellers, it was like shooting fish in a barrell!
The big problem for GOOG now is that market expectations are clearly very high. The downside risks are growing more and more every week relative to the upside potential. This is not to say that GOOG has permanently topped out. I am saying that at this rate, GOOG is much more likely to experience a sizeable correction before it makes significantly more progress to the upside. If you have any doubt that market expectations remain high for GOOG's stock, check out where the stock is now:
And, now, having said all that, I will point out that the technical picture on GOOG does not look too bad in the short-term. Despite the fact that it negated the upside gap from earnings, it is still in a short-term up-trend. The chart below shows that volume has quickly died back down after earnings and stochastics are close enough to flashing a buy signal. GOOG is back above the 50 and 200DMAs and both supports are now turning upward. The big technical negative is that OBV has not yet recovered. I did not show it here, but OBV has been in decline all year.
Be careful out there!