It’s not without political risks, but Alphabet Inc (NASDAQ:GOOG) is looking great again. For the bulls, a second attempt on the price chart looks worthy of a little of our attention on GOOG stock.
Despite uncertainties ranging from net neutrality, skilled labor immigration policies and potentially bearish China trade relations tied to the incoming Trump administration, GOOG stock is showing its wherewithal.
The “What ifs” are daunting. Not just for Alphabet Inc, but for other large-cap tech outfits such as Apple Inc. (NASDAQ:AAPL) or the likes of Amazon.com, Inc. (NASDAQ:AMZN). Silicon Valley would be on the butt end of Trump’s pro-business platform if his policies are actually pursued and ultimately implemented.
Regarding China, the impact of trade restrictions could be particularly hurtful for GOOG stock. Following the company’s difficult exit from China in 2010, Alphabet Inc is back and aiming to be a player in the second largest economy’s mobile market with Google Play and its new Pixel phone.
On the plus side, other Trump pledges regarding the repatriation of overseas cash hordes and cutting corporate tax rates are not only favorable for GOOG stock, but also more likely to gain passage through Congress without much effort.
Plus, if investors just look at GOOG’s stock chart, rather than the bluster of potential threats, you’ll see that things look pretty good.
GOOG Stock Chart
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During the first half of 2016, GOOG established a large corrective double bottom. That’s typically a welcome event for bulls because it unwinds excessive behavior. The technical reset then went on to forge a breakout attempt in October.
Unfortunately, the move to fresh all-time highs proved short-lived. Alphabet’s rally reversed, then winded up failing.
The good news is that GOOG stock, despite the anti-tech uncertainties from the Trump administration, has held up. Shares of Alphabet did fail in their in their first attempt at breaking out. But confirmed bullish testing of the 200-day simple moving average, filling a bullish price gap and holding the 50%-62% retracement zone all suggest that buyers are still interested in the company.
Now, GOOG shares are setting up for a second breakout attempt against its former highs.
How to Trade GOOG Stock Right Now
Currently, the GOOG Jan $810/$830/$850 call butterfly is attractive based on our optimistic view and our wish to be pragmatic. With shares at $789.30, the out-of-the-money, bullishly placed butterfly is priced for $2.50 per spread, or approximately one-third of one percent of GOOG stock.
A maximum profit of $17.50, or a return of 700%, would occur if GOOG stock’s second attempt at breaking out results in a rally of 5% to $830. The obviously alluring payoff is tempered by the fact the profit is only possible if shares land on $830 exactly at expiration of the contract.
Above $850 or below $810 in GOOG stock, the debit paid would be lost in full at expiration.
Between those boundaries, though, there is a nice-size expiration profit zone from $812.50-$847.50. And in the interim, a decent (but not too hopeful) rally of around 3% to 7.5% should provide you with some sort of profit that would make most Alphabet bulls blush.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
