Google Stock: A Bellwether
I look at Alphabet Inc (NASDAQ:GOOG) stock as a bellwether name that indicates the overall health of the global equity market. This is quite a large amount of pressure to be mounted on one name, and although my reasoning may not be for all analysts to accept, it is also difficult to deny.
Google stock is an example of an investment that paints such a beautiful picture that there is little to deny what it symbolizes. A simple trend line has served to define the entire bull market in Google stock. Even though this goes against my beliefs about confirming indicators, this trend line is the only indication I need to decide whether Google stock is bullish or bearish.
The trend is so perfect and pristine that, if it is ever broken, I could only assume that the entire backdrop concerning the equity markets is set for a pullback.
The following GOOG stock chart illustrates one of the most beautiful trend lines I have ever seen.
Chart courtesy of StockCharts.com
The Google stock chart above illustrates the uptrend that has supported the price since GOOG stock first went public. This uptrend line is created by connecting the troughs on the price chart using a simple trend line. This trend line symbolizes the entire bull market in Google stock: a bull market that has traveled from the bottom left to the upper right on the price chart.
GOOG stock has never traded below this trend line, but it has tested it on numerous occasions. Every time this trend line was tested, buyers were eager to step in and buy GOOG stock. Using this trend line as a trading tool would have provided many great opportunities.
Failing to hold this trend line would mean that the bull market in Google stock that spanned over decade has terminated, and I would also assume that major market indices and the general state of the economy have turned for the worse. Time will only tell what the exact backdrop surrounding such an event would be.
What I do know—without a doubt—is that if GOOG stock ever fails to remain above this trend line, my outlook will become firmly bearish on Google stock.
This trend line is so defined and obvious that I know I am not the only one who has an eye on it. I am sure there are many orders sitting on either side of the trend line in anticipation.
The following Google stock chart illustrates this trend line superimposed on a smaller time frame.
Chart courtesy of StockCharts.com
The superimposed GOOG stock chart illustrates that the uptrend line currently coincides with the 200-day simple moving average.
The 200-day simple moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When the share price is above the moving average, it is bullish. When the share price is below the moving average, it is bearish.
Every time Google stock has fallen below the 200-day moving average, the uptrend line has served as support. Each and every time, GOOG stock has bounced off of the trend support and regained its footing above the 200-day simple moving average.
There are two levels of support coinciding around one price, and this marks the dividing line between a healthy bullish trend and the beginning of a bear market.
One day, this trend line will be put to a serious test, and this uptrend line will not go down without a fight. A battle will be forged, and whichever side the price ends up on will dictate my view on Google stock. Above the trend line and I am bullish; below it and I am bearish. It is just that simple, I do not need any other information than that to make, or justify, my opinion.
Bottom Line on Google Stock
The only tool I need to decipher whether Google stock is in a bull market or bear market is a simple trend line. GOOG stock has always remained above this trend line and, as long as the price continues to trade above it, my views on Google stock and the markets as a whole will remain bullish.