GOOG Stock: This Is Where I Draw the Line
Alphabet Inc (NASDAQ:GOOG) stock has been a great preforming investment since its inception. The pundits and analysts that balked at its valuation when it first went public couldn’t have been more wrong as Google stock has become a staple in our lives and a bellwether for the health of the stock market. A company that began as a simple search engine has since morphed into a huge influence in the technology space, and as a result, its business model has become significantly more complicated.
For a fundamental analyst, assessing the company’s performance and financials must have become a daunting task with the amount of new divisions and segments that have popped up in recent years, compounded by the multiple acquisitions that Alphabet Inc bought on board. Luckily for myself, and other technical analysts, this daunting task is nothing I need to concern myself with because all my attention is focused on the Google stock chart. This simple stock chart that displays historical price data and uses a simple X-Y axis continues to suggest that higher Alphabet stock prices are likely.
For those not familiar with technical analysis, this method of investment analysis is based on the notion that historical price and volume data can be used to discern trends and forecast the future direction of price. This method is not perfect, but I have had great success in applying this method in my career that has spanned nearly two decades.
In my many years sitting behind a computer screen, looking at countless stock charts, searching for indicators I can apply to my trading strategies to gain an edge, nothing has come close to being as effective as a simple trend line.
This simple trend line does wonders in analyzing Google stock and it is illustrated on the GOOG stock chart below.
Chart courtesy of StockCharts.com
The stock chart above illustrates the progression that Google shares have experienced since they first went public in 2004. The stock’s price has essentially moved from the lower left to the upper right of the stock chart. This moment is characterized by higher highs and higher lows, which is the quintessential characteristic of a bullish trend. This bullish trend is best defined using a simple trend line, and it is illustrated on the Alphabet stock chart above. This simple trend is created by connecting the valleys on the stock chart, and it now symbolizes a major level of price support.
Alphabet stock has never ever traded below this trend line, and this adds quite a bit of significance to a trend line that has been intact for nearly 13 years. Google has tested this level of support on numerous occasions, and every time this trend line was tested, buyers were eager to step in and support the stock. Using this trend line as a trading tool would have provided many great trading opportunities, and if there was ever one single reason to own Google stock, it would be this uptrend line.
The trend line measures risk at any given point in time, and as long as Google remains above this uptrend line, I can only assume that higher prices will prevail and a bullish stance is warranted. If Google were to ever fall below this uptrend line and close below it, I can only assume that the bullish trend had finally concluded and that a much larger correction was set to ensue. With the weight that this company carries in the technology sector, I can only assume that such a trend break would also signal a large correction was set to ensue in the tech-heavy Nasdaq index.
The following GOOG stock chart illustrates the shorter-term trend that is supporting price.
Chart courtesy of StockCharts.com
The price chart above illustrates a similar simple uptrend that is supporting the advance, but on a smaller scale. This trend began in early November 2016, after the presidential election results were announced.
This bullish advance has been supported by the moving average convergence/divergence (MACD) indicator in lower panel. MACD is an effective trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. The bullish cross indicated that bullish momentum is now propelling Alphabet stock, and prices are geared to trend higher.
As long as price remains above this trend line, this bullish trend will continue. But if price ever closes below the trend line, it would suggest that a larger correction was set to ensue and that the major trend line, which is illustrated on the first chart, is going to be put to a test.
Bottom Line on Google Stock
The bullish trend that has defined the trading action in Google stock is best defined using a simple trend line. This trend line has supported price for as long as GOOG stock has been publicly traded. As long as the stock remains above this trend line, a bullish bias is warranted in which I can only assume that higher Alphabet stock prices will prevail.