The Market's Bermuda Triangle

Better known as earning's season. Google beat yesterday, just like AAPL's beat....

Not the kind of action you'd expect logically from a solid beat from AAPL...

In any case, GOOG was up in after hours just like AAPL was up in extended trading and suckered a lot of people in at least at a 5% loss in most cases.

So lets take a look at GOOG because the action after earnings has very little to do with "did they beat?", "Did they beat the whisper number?" It has to do with, "What will next quarter look like compared to this quarter" and that's why I said the other day in response to APL's beat, "Beating consensus is not always good" it sets a higher standard to live up to next quarter and if the market is leery about whether the company can do better next quarter, they'll discount that with lower prices.

Here's the GOOG charts...

 This hourly chart shows planned accumulation within the zone that is boxed in white. although we don't know for sure what the average price is of the accumulated position, we know they'll take the stock higher then that before selling into demand or distribution.  Looking at the recent high of the last few days we can see that confirmation wasn't all that strong on the hourly chart, in fact it just wasn't there. The gap up this morning showed a negative divergence on an hourly chart, that's pretty big stuff to hit the hourly so quickly.

The 30 minute chart shows some confirmation at the green arrow, (confirmation = 3C moving with price). that confirmation turned into a negative "relative" divergence. If we can get a leading divergence and 3C moves down similar to the vertical red arrow, then we'd be seeing some major selling in GOOGLE and there may be a trade there.

Whether there's a trade there or not, the thing I hope is impressed upon you is the after hours situation or extended trading in general, you can not count on it and unless you understand that and are using extended trading in a way that takes advantage of that (contrarian trading, such as shorting a massive after hours high or buying low), you should be very careful about extended trading and not assign too much importance to the price action outside of regular hours.

We'll keep an eye on GOOGLE.

Our last earning play on Tuesday, AMR short is now down nearly 7% and they beat as well!

Our INTC Earnings play is moving the right direction as well and even though JPM is up today with financials, I'm still feeling good about that trade thus far.