What’s Left to Push Alphabet Inc (GOOGL) Stock Higher?

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GOOGL stock - What’s Left to Push Alphabet Inc (GOOGL) Stock Higher?

Last week, Alphabet Inc (NASDAQ:GOOGL) allayed fears that its ad revenue may be under fire from increased competition. Google’s parent company blew past Wall Street’s first quarter expectations with earnings that rose 28% year-over-year and revenue that jumped 22% by the same measure. What’s more, operating margins surged 27% despite a hiring rush during the quarter.

Furthermore, unlike fellow “FANG” member Amazon.com, Inc. (NASDAQ:AMZN), which retreated sharply from its post-earnings highs, Alphabet stock held its ground following its earnings report. Follow-through buying appears to be creeping into the shares as well, with GOOGL looking to drift higher in Monday’s trading.

Here, we’ll look at the sentiment and technical picture for Alphabet shares, and determine the best way (or ways) to play the stock in the coming weeks.

What Could Drive GOOGL Stock Higher?

If earnings go well for a few other Big Tech stocks — Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) release their quarterly reports later this week — we could see a halo effect push shares higher throughout the short-term.

That said, there are some technical concerns that could slow Alphabet’s roll.

GOOGL stock chart view 1
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Shares are considerably overbought right now, with their 14-day Relative Strength Index reading hovering above 84.

Additionally, GOOGL stock met with intraday resistance near $930 on Friday, and could find trouble pushing past the $930-$940 region until the stock’s overbought condition is unwound.

Unfortunately for Alphabet bulls, there is little in the way of wiggle room for additional bullish sentiment to help drive the stock higher.

Currently, Thomson/First Call reports that 40 of the 46 analysts following GOOGL stock rate the shares a “buy” or better, with only six holdouts. If those six didn’t budge following last week’s earnings report, chances are that they won’t be upgrading Alphabet anytime soon.

There is potential for price-target increases, however, with the consensus price target of $983.65 resting a mere 6.4% above Alphabet’s Friday close. However, valuation concerns could just as well prompt hold ratings as the stock moves higher.

Options traders have grown a bit cautious when it comes to the short-term outlook for GOOGL stock. Currently, the May put/call open interest ratio rests at 1.08, as puts outnumber calls among those options set to expire within the next month. Furthermore, peak call OI of 980 contracts for the series rests at the in-the-money $900 strike, with considerably less OI residing north of Alphabet’s current perch.

In short, options traders aren’t looking for shares to move much higher over the short-term.

Lastly, May implieds are pricing in a potential move of about 2.44% for Alphabet through May expiration. This places the upper bound at about $947, with the lower bound at $903.

2 Trades for GOOGL Stock

Put Sell: With earnings out of the way, and little in the hopper to help push Alphabet stock higher over the short-term, a neutral-to-bullish put sell position may be the best bet for turning a profit right now.

Along those lines, the May $900 put has plenty of potential.

At last check, this put was bid at $2.63, or $263 per contract. The upside to this put sell strategy is that you keep the premium as long as GOOGL stock closes above $900 when these options expire. The downside is that should shares trade below $900 ahead of expiration, you could be assigned 100 of them for each sold put at a cost of $900 per share.

Call Spread: If you’re willing to take a risk and bet on a halo-rally from Big Tech, then a May $930/$950 bull call spread offers a nice potential return.

At last check, this spread was offered at $5.69, or $569 per pair of contracts. Breakeven lies at $935.69, while a maximum profit of $14.31, or $1,431 per pair of contracts, is possible if GOOGL closes at or above $950 when May options expire.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/whats-left-to-push-alphabet-inc-googl-stock-higher/.

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