GOOG Stock: Benchmark Stock Suggests Further Gains
The markets have been on an incredible run in 2017, and this move toward higher prices has proved to be the least volatile year in history, without a substantial pullback.
A correction will occur someday, and banking on one has proven to be a frustrating venture. I am in the camp that, when one finally does arrive, it will be substantial.
I am focusing on Alphabet Inc (NASDAQ: GOOG)—also known as Google—because it is one of the benchmark stocks that I use to gauge the general health of the stock market. The reason why I use Google has little to do with its size or its line of business. Instead, my reason is technical in nature and, therefore, it is completely based on the GOOG stock chart.
Using a stock chart to generate a view on an investment is called technical analysis, and it is based on the notion that historical data points can be used to forecast what the future may bring. This method can be as simple as a trend line or as complicated as 10 indicators.
I like to keep things simple, and it is why this stock ranks high on my list. A simple trend line has defined the entire bullish run in GOOG stock since inception.
This trend line is highlighted on the following Alphabet stock chart.
Chart courtesy of StockCharts.com
This stock chart illustrates how a simple trend line can define a long-standing bullish trend that is currently 13 years in development.
This beautiful trend contains the quintessential characteristic that defines all bullish trends: a sequence consisting of higher highs and higher lows. Connecting the higher lows on the GOOG stock chart is how this uptrend line was created. The size and the points of contact used to create this uptrend line are what make the chart very special.
Google stock has never traded below this trend line and, as long as it remains above it, the trend that began in 2015 is still in development. With this in mind, the stock price has appreciated by 1,963.4% since inception, and further gains are likely still in development.
This uptrend line is what I am using to gauge the health of the stock market. If GOOG stock would ever lose its footing and fall below that line, I would have to believe that further losses are on the table, which would also suggest that equities, as an asset class, are also selling off as well.
The good news I have to share is that there is little to suggest that this trend line will be broken, let alone be tested in the near future. That’s because the price action on the Google stock chart suggests that the next move is likely toward higher Alphabet stock prices.
The following stock chart illustrates the price action suggesting that further gains are on the horizon.
Chart courtesy of StockCharts.com
This Alphabet stock chart illustrates that, since May, Google stock was trading in a defined trading range, where support resided at $920.00 and resistance resided at $1,000. On October 27, Google gapped higher and broke above resistance, completing the pattern and suggesting that further gains are on the horizon.
After a brief move higher, a correction ensued and, on December 5, the level of resistance that defined the trading range was tested from above. Testing a previous level of resistance from above is highlighted on the stock chart as a backtest. This serves to reinforce the bullish implications suggested by the breakout while simultaneously establishing a new level of price support.
Throw in the fact that all the price action remains above the 200-day moving average, which is a bullish indication suggesting that Alphabet stock is in a bullish state, and this bodes well for the stock market, suggesting that this stellar bull market in equities has further to run.
As long as Alphabet stock continues to trade above the uptrend line that is highlighted on the stock chart, I will have to assume that this stock will continue to appreciate. Since I use GOOG stock as a gauge for the health of the market, I can also assume that the run toward higher prices in the indices has further to go.