When Big Cap Tech Gaps Big


Google broke out to new all time highs this morning after announcing earnings yesterday. The real problem for investors is after a huge move, what should investors do?

I want to look at previous examples and end the article with the Google chart. Let's look at Netflix (NFLX). All of the gaps up after earnings are marked in pink. This chart is particularly volatile. But you can also see on the SCTR when it surges to become a top performer, it usually hangs in there for a while.

Amazon (AMZN) had been losing its ability to h​ave the stock run up without big earnings. So they had to start showing results on the earnings report. In January they posted a positive change in their earnings reports. Lets look at the chart. From January 2015 after AMZN moved up $50 on earnings, it is up another $125 in 6 months. You can also see in April 2012 Amazon hit the gas pedal to breakout. That April 2012 gap move higher was very big. However, the stock pulled back offering an attractive entry. Holding these volatile stocks is a ride both ways, but these huge earnings gaps where the SCTR jumps up to the top of the range is a good clue something is changing. Especially in the large caps, it needs institutional power to get onboard the stock.

Below is Apple (AAPL). Apple gapped on Earnings in July 2013 below the Pink arrow to lift the SCTR off the floor. Then Apple pushed higher where the orange arrow is and stalled. In April 2014, Apple gapped again. In both cases the gap to break out of the consolidation range were big clues of better things to come.

Here is Google (GOOGL). We can see a couple of earnings periods where Google gapped higher and the SCTR surged quickly to the top of the range on huge volume. Looking below at the previous examples as well as the same bullet like moves on the charts of Tech horsemen shown above, it looks to me that investors should try to find a place to enter the stock after a big move up. If institutions are moving in on huge volume, it looks like a great clue that they are optimistic.

With Google's huge surge in volume, the breakout above previous resistance and an SCTR jumping to 99, the story looks to be repeating when the big-cap-techs-gap-big on earnings.

Good trading,
Greg Schnell, CMT

Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More
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