Alphabet Inc: GOOGL Stock Is Going Lower. Here’s How Far.

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Shares of Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) as of Tuesday’s close are about 9% below where they traded before the company’s April 21 earnings report. Alphabet’s lackluster results set in motion a selling spree — one that now looks to have a new defined target to the downside.

Beat the BellWhen Alphabet reported its first-quarter results, it missed on both the top and bottom lines. While that in itself didn’t spread any joy, what really spooked investors was that the miss in earnings was apparently due to a decline in advertising prices.

Alphabet is a well-diversified company, but it too (at least in parts of its businesses) can be subject to economic cycles such as when ad spending sees cyclical ebbs and flows. Additionally, large-cap tech stocks have showed notable relative weakness in 2016 after holding up the broader stock markets last year with relative strength.

As more institutional investors take at least partial profits in large-cap tech, stocks like GOOG / GOOGL likely will have a difficult time holding up.

GOOGL Stock Charts

On the multiyear weekly chart, we see that GOOGL stock over the years has often mean-reverted back to its blue 100-week simple moving average. Despite the drop from the February highs, Alphabet shares still are holding well above this MA.

Looking at momentum, we see that the late 2015/early 2016 highs in the stock were not met with new highs in the MACD oscillator, which has been making a series of lower highs since last November. Also note the failed weekly rallies where weekly candles with long tails or other sharp bearish reversals have taken place since last December. This shows bullish exhaustion, as traders failed to keep the stock at those highs and sellers quickly took over.

GOOGL GOOG weekly chart
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On the daily chart, we see that last week, GOOGL stock pierced below its red 200-day moving average and now has arrived at some horizontal resistance, which I marked with the dotted line. Considering the three notable bearish reversals from last December, this February and again in the second half of April, it is likely that we see a break below current levels.

Note that we can draw a simple line of support that currently comes in around the $660 area, which may be a logical next target for the stock given the aforementioned buyer exhaustion and the dynamics that come along with it.

GOOGL GOOG daily chart
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Active investors and traders could look to buy cheap put options or put spreads a couple of months out, with a first price target in the $660-$670 area. However, respect any sharp bullish reversal — particularly on a weekly closing basis — as a potential stop-loss signal.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/05/alphabet-inc-googl-stock-lower/.

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