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How to Trade Alphabet When It Reports Earnings

Alphabet has been the best-performing FAANG holding over the last six months and in 2021. Can it maintain momentum after earnings?

Alphabet  (GOOGL) - Get Alphabet Inc. Class A Report has been an excellent performer over the last several quarters. Investors are hoping the company’s upcoming earnings report will help propel the stock to new heights.

Alphabet's earnings are due up after the close of trading on Tuesday. It’s set to be a busy week with other FAANG components, Tesla  (TSLA) - Get Tesla Inc Report and Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report also reporting earnings.

Alphabet has been the best-performing FAANG stock this year and it’s not even close.

Shares are up 31% so far in 2021. The next-best performer is Facebook  (FB) - Get Meta Platforms Inc. Class A Report, up 11.9%. After that, no other FAANG stock is up more than 3% for the year. The group has been pretty stagnant over the past few quarters

The results over the last six months are similar, with Alphabet up 41% vs. the next-best performer - Apple  (AAPL) - Get Apple Inc. Report - up 16.7%. 

Can Alphabet keep up its momentum? Let’s look at the chart.

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Trading Alphabet

Daily chart of Alphabet stock.

Daily chart of Alphabet stock.

Given how well the stock has done, it wouldn’t be surprising to see a somewhat muted or even a sell-the-news reaction to the report. That’s even if the quarter is very strong.

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That said, it’s also tough to bet against the leading racehorse.

It took about two months but the stock finally broke out over the $2,100 area. It didn’t slow down at $2,200 as Alphabet stock quickly ran to $2,300.

It's chopping near that area now and riding the 10-day moving average higher and bulls are wondering if they can squeeze some more gains out of this name.

If they can, a move over $2,300 is the top priority, followed by a push toward $2,375. That would send Alphabet to the 261.8% extension, a potentially key level in the short to intermediate term.

The exception to that observation would be a breakout over that mark, likely paving the way to $2,500.

On the downside, I’m mostly watching for a close below the 10-day moving average and last week’s low at $2,240.

That would create a potentially attractive buy-the-dip setup — particularly if Alphabet reports a solid quarter.

It puts the 10-week moving average in play near $2,175, followed by the breakout level at $2,100 and the 50-day moving average. 

In either reaction, keep these key levels in mind.