Google vs. Intuitive Surgical - After hours Price Reaction

A person I follow very closely in the financial markets pointed out something very interesting regarding Google (GOOG) versus Intuitive Surgical (ISRG) and illustrated some very strong reasons why Google surged and Intuitive Surgical tanked DESPITE both companies completely destroying wall street estimates. I want to post it here because I am just like him - A true believer of technical analysis. Wall street media will CONSTANTLY misguide and disappoint. But charts and your own intuition never will.



In the Google Chart, the stock made a move up from the lows, reached the 50DMA and retraced all the way back to the 20DMA. From the action today, Google DID NOT run up, in fact it traded down $5. PERFECT SETUP for an earnings play. From a psychological point of view, there were simply TOO MUCH pessimism about Google. Too many puts being bought, too many doubters, endless rants about COMSCORE data (boy were they wrong!), and low expectations (whisper number in the street indicated 4 cents BELOW the consensus). The result? Any upside surprise to earnings would send this stock flying - as we see in the afterhours Google is now hovering at ~$529 UP NEARLY $80, or 18%.




Intuitive Surgical on the other hand had a MONSTER move up (from the low of 254 all the way to $357, had a small retrace back to the 50DMA, but then into earnings MADE ANOTHER GIGANTIC MOVE from $315 all the way to $350. Note the "double top" pattern that formed where I circled. Indicators had no room to run either. On the psychological level, there were simply too many bulls buying hand over fist for this stock - pumping it up. And when that happens, THATS THE TELL. EVEN IF ISRG BEATS, THEY WOULD BE VULNERABLE TO A PROFIT TAKING SELLOFF. In order for ISRG to continue its monster move up, they just had to literally beat by a gigantic margin. And even then, the upside would have probably been limited. In this case, beating earnings was already factored into the stock premium. And this is why the stock is now getting annihilated after hours on MASSIVE VOLUME. Last check down $33, or 9% @ $315. OUCH

Lesson to be learned here? Charts tell the truth. As well as the sentiment about companies. When there's too many bulls piled onto a trade and the stock makes a gigantic move up into earnings, that would mean expectations are SKY HIGH, and the slightest earnings miss or disappointment will absolutely destroy it afterhours. Vice Versa, from Google we saw had way too many bears, way too many doubters, way too much pessimism. Presto, the shorts are now going to be carried out on bodybags.

Always remember the timeless wisdom of Warren Buffet: "BUY on FEAR - SELL on GREED".

I still am a firm believer to not invest heavily into earnings. However, I would be lying if I said I'm not happy man right now. Watch for another mega push up in the markets tomorrow off of this momentum. But at the same time, expect the markets to hit resistance when we reach the late January highs (check blog post on 4/16) because remember after every monster move up IT'S ONLY HEALTHY TO HAVE PROFIT TAKING AND RETRACES. If there wasn't, the markets would be very scary.

I believe after a test of that high and a possible retracet menpause, we could very well see that top get broken off. Then, I believe we could ultimately hit the 200DMA on the indices.

Going to be very exciting times in the markets in the near future. Stay sharp and stay alert. This is when money can be made.

Invest wisely, good luck to all of us.

-DL

Disclosure
Long AAPL, GOOG, GRMN, 50% MOS
No Short Positions