Google Being Lackluster, Amazon Earnings Skyrocket, Tesla Leaves Everyone Behind

By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

Last week was rich in Q3 earnings reports. Volatility was not very high, and while many companies were profitable, some large ones were unable to keep the pace up and went lower during the trading session. As a result, the stock indices continued going down as well. With positive reports across the board, stocks went down because actual earnings fell short compared to the expectations.

For instance, Alphabet (NASDAQ:GOOGL) earnings were up by 3.50% compared to the previous quarter, but the stock still lost 7% when the report came in, as the expectations were higher.

Starting April 2016, Alphabet reports have always beat expectations, and once it did not happen, the market reacted accordingly.

Another negative development for Alphabet is that 2018 earnings came lower than 2017, which was never the case before.

Technically, Alphabet is weak, too. The price has already broken out the 200-day SMA, which had been acting as support over the last two years. Now, Alphabet will be most likely testing the round number of $1,000, which looks like a good entry point for long trades. Conversely, if this level is broken out as well, unpredictable events may follow, with the price sinking as low as to $800.

While Alphabet went low because of not meeting expectations, Amazon earnings hit records, but it still did not help it to reach new highs as the price finished the trading session in the red.

According to the report, Amazon’s net profit went up by 1,126%. Still, it failed to meet expectations.

The selloff was mostly related to the next quarter expectations that appeared to be far less optimistic. Q4 is, after all, holiday shopping season.

Technically, Amazon shares are trading around the 200-day SMA, which acts as support. Last, the price tested it in early 2016, after which the price went from $500 to $2,000. Then, it formed the double top reversal pattern, and has already reached its downtrend target. There’s a support at $1,600, and in case the price bounces back, it may reach $1,860. At this support, there was the largest volume spike in 2018, which means the price may continue rising further.

Unluckily, the overall outlook shows the price is unlikely to hit new highs, as there’s a strong resistance at $1,900. If the price bounces off it, this may lead to a major fall.

Of course, one should also mention Tesla’s report, after which short sellers suffered losses again. They are likely to get used to it, however, and some of them are already changing their mind.

Tesla has been around for 15 years, and it’s only the third time it was able to finish a quarter in the black. According to the Q3 earnings report, the company recorded a net gain was $312M, which was unexpected by most analysts, as the outlook was negative.

Elon R. Musk kept his word in achieving the target of Model 3 production; this was the main reason for the company being able to record its net gain. Musk now says Tesla is capable of making net profit each quarter from now on.

In Q3 Tesla succeeded in selling 55,840 Model 3 cars, earning a $3B profit, which is 3 times higher than last quarter.

The Q3 earnings report also changed news sentiment. Now, Tesla is referred to as ‘the best electric car manufacturer’. Meanwhile, Musk is going to create new factories in China and the EU in order to reduce customs duties and transportation costs. In order to succeed against Model 3, the competition will have to spend a few years on R&D before reaching more or less the same level.

Traders are very much interested in Tesla news, which can be easily traced on the charts. The news pieces are very different, and while today the media may say Tesla is prospering, tomorrow they may post something like ‘Musk went high and made another $20M tweet’. With such contradictory news, it’s no wonder why the stock is trading within such a wide range.

Over the last two years, Tesla shares have been trading between $250 and $400, while volumes go way higher when the price approaches $250. The 200-day SMA is at the same level, and it has been supporting the price over the last 4 years. This time, after the report came out, we can expect the price to break out $400 and hit new highs, even with US indices falling.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Having majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.