Alphabet Inc: Bracing for Impact in GOOG Stock
GOOG Stock: Buying Opportunity?
Market volatility is the order of the day. Volatility at this time of year usually ends in some sort of crescendo of selling that comes on high volume. By the time this plays out, many are left wondering exactly what happened, and the media has a field day as nothing grabs headline like bad news. When selling finally reaches this climax, all shares, even Google stock (Alphabet Inc (NASDAQ:GOOG)) get punished.
In anticipation of such an event, I like to see where support lays, as I have learned in my many years in this business that selloffs present great opportunities to pick up shares before the next upswing. In some cases, these events provide second chances to get in some names that may have passed me by. Google stock is one of them.
The following chart illustrates the long-term trend in GOOG stock.
Chart courtesy of StockCharts.com
The trend line that has supported the price of Google stock since inception is actually quit breathtaking. That is why I always use multiple timeframes when I assess a bias on a particular position. As long as GOOG stock is trading above the uptrend line, my bias will be bullish and I will be looking for a bullish trading setup to exploit. This may seem a bit too simplistic but, from my experience, I find that the best strategies are the most simple ones.
The trend line currently sits at just over $700.00. A dramatic selloff could take shares down greater than 10% and the long-term trend would still be intact. This level will need to be watched with great anticipation, just in case a selling event does take place.
Aside from the time of year that may act as a catalyst, the trading action above the trend line supports the bullish premise. See the following weekly chart of GOOG stock.
Chart courtesy of StockCharts.com
GOOG stock has been trading within a trading range for approximately one year, and is now at the top of the range and is testing that level. Bulls are hoping for a breakout. The bulls’ hopes of a possible breakout have increased because, In July 2016, the moving average convergence divergence (MACD) generated a bullish cross.
MACD is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish signals. These signals give a trader a heads up regarding the direction of momentum. Longer timescales serve to smooth out signals and reduce the number of signals that are found on daily or hourly charts.
The bears’ hopes are centered around the current turmoil in the markets, and they are hoping that the selling will accelerate.
If we look even closer into the trading action, there is some constructive patterns currently in play, as the following short-term chart using a one-hour scale illustrates.
Chart courtesy of StockCharts.com
Google stock is currently trading in a tight range, bound by the old highs and the support created after GOOG stock posted a gap up, post-earnings. This level needs to hold in order for the bulls to have any chance at making new all-time highs.
The share price of $785.00 is proving to be a critical level of support, as any selling of this level is quickly rejected. Google stock needs to close above $815.00 for the trend higher to continue. A close below $785.00 would most likely signal that the gap in share price is going to be filled, thus a move to just under $770.00 is expected.
Since September is on average the worst-performing month of the year, if Google stock can maintain this level into October, the bulls might receive the new highs they seek.
The Bottom Line on Google Stock
I am bullish on Google stock, and only a break of the longer-term trend will change my bias. The current short-term picture is slightly clouded by seasonality and the inability of GOOG stock to follow through at the top of its trading range. If the selling pressure does continue, I am anticipating a test of the longer-term trend line.
