This Is Where I Draw the Line on Google Stock

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GOOGL Stock: Critical Support Currently Resides at These Coinciding Metrics

I refer to Alphabet Inc (NASDAQ: GOOGL) as a heavyweight stock in which Google stock acts as a gauge of the overall health of the equity markets. So as long as Alphabet stock continues on its trek towards higher stock prices, then the bull market in equities is set to continue.

On October 11, I published a report titled “Google Stock Is Setting Up Its Next Bullish Advance.” In that report, I outlined that there was a technical price pattern in development on this stock chart that would determine whether Alphabet stock was set to make a move towards higher or lower stock prices. I explained that I had the inclination to believe that this pattern would resolve itself in a bullish manner because the predominant trend that preceded it was bullish and remains so.

There was an attempt to break out of this pattern in an upward direction, which would have implied that higher stock prices were on the horizon. The problem is that this attempt has failed, and the GOOGL stock price has fallen back within the pattern, opening up the possibility that a failed pattern is in play. Failed patterns are extremely powerful patterns and my attention is definitely piqued.

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Could this spell disaster for Google and the entire market as a whole?

Before I, or anyone, jumps to conclusions, let’s take a closer look at what just transpired on the following stock chart.

google stock chart

Chart courtesy of StockCharts.com

This Alphabet stock chart has been annotated in order to focus on the trading range that has been in development since late May after Google gapped higher following a better-than-expected earnings report.

Trading ranges act as consolidation patterns where previous gains are digested and overbought conditions are alleviated in order to set the stage for the next move. This trading range is currently bound by resistance at $1,000 and support at $920.00. Whether GOOGL stock breaks above resistance or falls below support will dictate whether this stock is set to advance or decline.

Google stock attempted to break above this trading range in mid-October but it fell short of accomplishing this feat and fell back within the pattern. I have highlighted this as a potential failed breakout on the stock chart. Failed patterns are powerful indications, and if this is indeed a failed breakout, then the stock will likely trade towards support and then fall below it.

Support, which currently sits at $920.00, just so happens to coincide with the 200-day moving average. The 200-day moving average is a trend line that is popular among the trading community, and it is used as a dividing line that separates healthy bullish investments from unhealthy bearish ones. Trading above the moving average is bullish, while trading below it is bearish.

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In order to confirm that the technical pattern is a failure, it would need to fall below $920.00, which would negate the bullish implications currently suggested by the 200-day moving average.

The 200-day moving average just so happens to coincide with another metric that is highlighted on the following Alphabet stock chart.

alphabet stock chart

Chart courtesy of StockCharts.com

The 200-day moving average and support outlined by the trading range just so happen to coincide with the uptrend line that is highlighted on this GOOGL stock chart.

This uptrend line defines the bullish trend in this stock, which consists of a sequence of higher highs and higher lows. The uptrend line was created by connecting the sequence of higher lows and it dates back to the first day Google stock began trading. Refuting its significance is a difficult thing to do given the number of times this uptrend line has been tested, and the stock continues to trade above it.

The uptrend, much like the 200-day moving average, acts like a dividing line. As long as Google stock is trading above it, I can only assume that the bull market that began in 2004 is still intact, and higher stock prices will prevail with time.

All levels of support currently reside at $920.00, and if Google trades below this metric, I will have reason to believe that the bull market in GOOGL stock has concluded and therefore, lower prices are on the horizon. Given its status as a heavyweight, these repercussions will be widespread, meaning that a global bear market is evolving.

Analyst Take: 

A failed pattern on the Alphabet stock chart has me concerned that a possible sell-off in the stock is looming. There is a  multitude of support which currently resides at $920.00, and as long as Google stock remains above this price point, I will have the inclination to believe that my concerns are unfounded and a bull market is still intact.