Google is a momentum stock whose parabolic bubble popped after setting a split-adjusted all-time intraday high at $615.04 on Feb. 26. After breaking below its 50-day simple moving average on March 24, the downside for the stock gained negative momentum. It traded as low as $530.53 on April 7, for a high-to-low decline of 13.7%.
This wide trading range pre-earnings is reason enough for investors to attempt to capture a portion of this volatile range, both before and after Google reported their quarterly results.
On April 14, I wrote "Google Wants to Follow You Around the Mall," which included a pre-earnings profile for the stock. Investors who were betting on a positive reaction to earnings could have bought the stock at this week's value level at $536.08 on April 15, as Google traded as low as $530.64 that day.
The reason for buying at $536.08 was to capture the upside to our quarterly risky level at $562.40. That risky level was tested before the earnings release on Wednesday. Capturing this 4.9% before taking the post-earnings risk was the prudent strategy based upon our "buy-and-trade" levels.
Google reported earnings per share of $6.27, but missed analysts' estimates by 14 cents, with a miss on the revenue line. The stock plunged to as low as $524.89 after the closing bell. Investors interested in buying weakness had the opportunity to begin to buy at the weekly value level at $536.08.
Capturing volatility is best accomplished using GTC (good until cancelled) limit orders to buy weakness to a value level and to sell strength to a risky level.
The daily chart for Google is neutral, with the stock above its 200-day simple moving average at $514.75. It's below its 21-day and 50-day SMAs at $561.85 and $584.84. The daily slow stochastic, our measure of short-term momentum, is rising. That indicates that the stock should stay above its 2014 low at $530.53.