Google Stock Must Hold This Level of Price Support

GOOGL Stock A Bull Market Hangs in the Balance
iStock/volkan.basar

GOOGL Stock: A Bull Market Hangs in the Balance

Four months have passed and the markets have failed to make any real headway in 2018. This year has been characterized by elevated levels of volatility, which have resulted in wild market swings, making the trading environment a tenuous one.

The market indices can only trade in a range for so long before the predominant trend either reasserts itself or a larger correction takes hold. These are anxious times for sure, because what happens next will determine how the rest of the year shapes up.

I am focusing on Alphabet Inc (NASDAQ:GOOGL) stock because I use it as a gauge to determine the health of the overall markets. I believe that as long as Google stock is in a bullish trend, this bodes very well for the indices, suggesting that the markets are healthy and that a bull market is still in development.

The bullish trend I am referring to is highlighted on the following Alphabet stock chart.

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Chart courtesy of StockCharts.com

This immaculate bullish trend on the GOOGL stock chart has been in development since the stock’s inception. It is characterized by the quintessential characteristic that defines all bullish trends, which is a sequence containing a series of higher highs and higher lows.

This sequence was responsible for taking Google stock from $50.05 to $1,034, where it currently stands, representing a mind-boggling 1,965.93% return since its inception.

I captured this immaculate bullish trend using an uptrend line. This uptrend line is highlighted in blue on the GOOGL stock chart and it was created by connecting the sequence of higher lows.

The uptrend line acts as a very significant level of price support. It has been tested a number of times over the years, and Alphabet stock has never traded below it. This inability to trade below this uptrend line is a testament to its significance.

As long as Google stock is trading above this uptrend line, I can only assume that the bullish trend that began since inception is still in development and, therefore, higher Google stock prices will prevail over time.

If GOOGL stock ever lost its footing and started trading below this uptrend line, I would have to assume that the bullish trend that began in 2004 has finally come to an end.

The repercussions of such an event would be widespread, because if Alphabet stock is set to sell off, then I would also have to assume that the market indices are not going to fare much better.

The recent volatility in the markets has created widespread selling pressure and GOOGL stock is currently testing this ever-important uptrend line. It is safe to say that I am watching this metric very closely, and it is why a closer look is warranted.

The following Alphabet stock chart takes a closer look at the uptrend line that has been supporting this bullish trend.

Chart courtesy of StockCharts.com

This Google stock chart superimposes the previous chart, illustrating that the uptrend line has been tested vigorously since late March and that support currently resides at $1,000.

I have added the 200-day moving average to the GOOGL stock chart because it coincides with the uptrend line.

The 200-day moving average is also a significant price metric. Like the uptrend line, it also acts like a dividing line that separates bullish stocks from bearish ones.

Distinguishing between these two polar opposites is as easy as pinpointing whether the stock price is trading above or below the moving average. A stock trading above it is bullish, while a stock trading below it is bearish. It’s just that simple.

It is very common for this moving average to act as a level of price support. And because the 200-day moving average and uptrend line coincide, Alphabet stock is testing both of these levels of price support at the same time.

In order to maintain the notion that a bull market is still in development, Google stock must maintain its footing above $1,000. I believe that a sustained close below $1,000 would suggest dire consequences for both Alphabet stock and the entire market.

My eyes are peeled, as I watch Google stock with trepidation.

Analyst Take 

I use Alphabet stock as a gauge of the health of the overall market. Google stock is currently testing support outlined by both an uptrend line and the 200-day moving average. GOOGL stock needs to stay above both these metrics or I would have to believe that the health of this stock—and the market indices, in general—have come into question, suggesting that a larger correction is on the horizon.