As four big tech bellwethers ready their earnings reports after the bell on Thursday, the big question is whether their results will further fuel a solid rally in the tech sector.

Major companies due to report quarterly earnings include Dow components, Intel Corp, Microsoft Corp, International Business Machines and Google Inc.

Market participants are optimistic about Google and Microsoft earnings and lukewarm toward Intel and IBM results.

The Nasdaq 100 index, which tracks the 100 largest non-financial companies listed on the Nasdaq, is up 7.3 percent so far this year, and could easily top its 10 percent gain in October, which was its best month since Sept 2010. For the year the S&P 500 is up 4.6 percent.

Solid earnings would help to confirm the price action we have been seeing in the Nasdaq 100 index, said Steve Place, a founder of options analytics firm investingwithoptions.com in Mobile, Alabama.

Maybe investors have already anticipated solid earnings from the major tech stocks and that has led to the breakout in the index.

Chip makers have also rallied, with the PHLX semiconductor index up 13 percent for the year.

INTEL AND NASDAQ

The risk, however, is that strong results could give opportunity for investors to take profits on recent gains. Earnings announcements from Intel have often come when the market reaches a top, said Jason Goepfert of SentimenTrader.com.

Intel's earnings reports have a funny way of occurring near peaks in the broader market, he said, adding especially for technology and particularly when the market has already been doing well.

Goepfert looked at the Nasdaq 100 performance after Intel earnings in the month of January when the index was within 2 percent of a high. This occurred five times in the period between 1997-2011 - 2004, 2006, 2007, 2010 and 2011.

Over the next two weeks after Intel results, the Nasdaq never managed to gain more than 1.7 percent at its best point during any of the five instances, and lost more than 2 percent every time at its worst point.

Despite Intel's impact on the Nasdaq 100, some market analysts are optimistic about the company.

While Intel was recently downgraded by some sellside analysts, MKM Partners semiconductor analyst Dan Berenbaum remains constructive on the shares, with a 12-month price target at $29.

The stock is currently trading up 0.8 percent at $25.57.

MKM Partners derivatives strategist Jim Strugger, in a report, recommends two bullish options strategies for Intel. One entails buying the stock to capture the company's dividend and against that position selling the July $23-$29 strangle to generate an additional synthetic yield of 5.8 percent.

A short strangle involves the selling of a call and a put with the same expiration date and different - but both out-of-the-money - strike prices. This strategy is a play against excessive volatility - the seller of the $23 put and the $29 call collects the premium, and only starts to lose money if shares move sharply beyond those points.

Another trade for upside exposure is buying the July $26-$29 call spread, which involves the sale of the $29 strike against the purchase of the $26 strike for a net cost of 90 cents per contract. The trade would break-even at $26.90 to make a maximum of $2.10 per spread with the stock at $29 or higher at July expiration, Strugger said.

OPTIMISM IN MICROSOFT, GOOGLE

According to sentimenTrader's Goepfert, Microsoft and Google are two stocks which have among the most optimistic sentiment in the S&P 1500 index, suggesting they are going to have high hurdles to overcome on Thursday.

His sentiment scores for Microsoft is 82 percent, the 16th highest in the S&P 1500 index and Google at 80 percent, the 26th highest in the index. That means that the sentiment toward both stocks is more optimistic than at least 80 percent of the other stocks in the index. Goepfert views 80 percent as extremely optimistic and under 20 percent as extremely pessimistic.

The scores for IBM and Intel are lower with 70 percent and 66 percent, respectively, he said.

The results are derived by averaging seven measures of sentiment for each stock. That includes short interest as a percentage of a stock's average trading volume; short interest as a percentage of a stock's total float; put and call open interest and put and call volume over the past week.

In options activity, Microsoft and Google shares are expected to show less volatile post-earnings moves this season.

The activity on Microsoft suggests the stock won't move more than 3 percent, said Gareth Feighery, a founder of Philadelphia-based options education firm MarketTamer.com. The average earnings move for Microsoft has been 2.2 percent for the past four quarters, according to data from options analytics firm Trade Alert.

In Google, derivative strategists at Goldman Sachs Group said Google January options are implying a 6.5 percent move post earnings compared to an average move of 7.3 percent for the past eight quarters.

Analysts on average were expecting earnings of 61 cents per share for Intel, according to Thomson Reuters StarMine SmartEstimates, which ranks analysts' estimates according to their past accuracy.

For IBM, the forecast was for $4.63 per share, and for Google, the forecast was $10.55 per share. For Microsoft, the forecast was 76 cents per share.

(Reporting By Angela Moon and Doris Frankel; Editing by Andrew Hay)

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