Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) rallied more than 4% in the first week of trading for 2017, and by so doing, overcame their December 2016 highs. The next major catalyst for the stock is likely to be the earnings announcement on Jan. 26. And looked at through the lens of technical analysis, GOOGL stock is giving us some well-defined price levels to focus around.
When I last discussed Alphabet stock on Dec. 6, I offered that GOOGL could see a pop off important technical support and possibly into year-end for a Santa Claus rally. The very next day, shares took another leg up and reached my near-term price target around $820 just five trading days later.
I still view the month of January to potentially be a tale of two different types of markets. While the first week of 2017 saw a further spillover effect of the late 2016 “Trump Bump,” the second half of January will bring about a heavier corporate earnings calendar as well as the presidential inauguration.
Obviously, it is too early to tell how markets will react to these events, but given the sharp rally we have witnessed in stocks over the past two weeks, I don’t think it’s farfetched to expected at least a little cool-down in stocks over the near- to possibly intermediate-term future.
And GOOGL stock could be one of the victims here.
GOOGL Stock Charts
If we look at the multiyear weekly chart of GOOGL stock, we see that the uptrend in a well-defined pattern (red dotted parallels) remains intact.
However, we also see that shares are now again trading near the very upper end of this channel.
Broadly speaking, stocks tend not to break out of these longer-term uptrending channels for very long before mean-reverting back in. While a breakout of this channel to the upside is certainly not out of question, a successful breakout likely needs a major news catalyst … such as potentially a great earnings and outlook report by Alphabet on Jan. 26.
On the daily chart, we see the bullish reversal that took place in early November and again in early December, which in early December got me to buy the stock for a trade, as discussed above. The technical confluence zone of support around the $750 area remains important through a multiweek/multimonth lens, just as horizontal resistance around the $820 area is important.
Last Friday, GOOGL stock rallied about 1.5% and closed the day and week above $820. If momentum can sustain, then the stock should see $845-$850 before the Jan. 26 earnings report.
From my perspective, I will not be in GOOGL through the earnings report. Instead, I believe the best way to approach Alphabet is to re-evaluate the stock after earnings have passed.
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