Shares of Alphabet Inc (NASDAQ:GOOGL) rebounded nicely following their short-lived but sharp post-earnings selloff in late January. This very ability of GOOGL stock to recover so quickly speaks to underlying demand and a multimonth uptrend that active investors and traders must respect until proven otherwise.
When I last discussed Alphabet stock on Jan. 9, I said that shares appeared to have good upside potential into late January. I wanted to target the $845-$850 area before the Jan. 26 earnings report. The stock reached the upper end of this price range by Jan. 24.
Note that this was specifically a pre-earnings trade; the goal was to get out before Alphabet’s report on Jan. 26.
Why? Because empirically, trying to time a specific post-earnings outcome for any given stock has at best a 50% chance of success.
While parts of the broader stock market showed some signs of volatility in recent days, the tech-heavy Nasdaq-100 — as represented by the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) — continues to motor higher. Both GOOGL stock and GOOG stock, being an important part of this index often times can flash important signals as to the next directional move in the Nasdaq-100.
GOOGL Stock Charts
Looking at the big-picture multiyear weekly chart of Alphabet, we see that the uptrend (purple-dotted parallels) remains well intact. However, GOOGL is now bumping up against the very upper end of this range.
Another way of looking at this trading channel is to note that previous attempts at overshooting to the upside failed. As such, traders and investors primarily want to respect the trend.
The weekly chart provides some perspective as to the possibility of another explosive move higher from here. In fairness, that likelihood is fairly low in this time frame — at least without some sort of sideways consolidation, if not an outright corrective move lower to the middle or lower end of said channel.
On the daily chart, we see that GOOGL stock last November and December found support at its 200-day simple moving average (red). This was followed by a rally that pushed the stock back above its 50-day MA (yellow), which acted as support in early January and early February.
The sharp rebound following a multiday selloff on the back of the January earnings report is impressive. By last week, it had GOOGL stock bumping right back at the pre-earnings levels around $860.
Although the stock has taken a little breather in recent days, on Monday, shares closed well off their intraday lows. Follow-through buying commenced on Tuesday.
Active investors and traders can now use Monday’s lows around $840 as a stop-loss to play the stock higher for a trade to new highs with a first upside price target around $870-$880.
More conservative traders may want to first wait for GOOGL stock to close back above the $855 area before legging into this trade.
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