Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) has climbed for the past couple days as the Nasdaq-100 — represented by the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) — earned a bid on the back of top component Apple Inc. (NASDAQ:AAPL). Apple is in the midst of one of its sharpest multiday rallies in history. As a result, though, GOOGL stock is itching to break higher out of a constructive consolidation phase.
When I last discussed shares of Alphabet on Aug. 5, I offered that the stock’s path of least resistance pointed higher. While GOOGL has largely traded sideways since, in the bigger picture, things remain as constructive for shares as ever.
After GOOGL stock gapped higher and rallied following the late-July earnings report, it settled into a consolidation phase that, barring any significant outside disruptions, should remain the technical base from which Alphabet could begin its next leg higher.
Before looking at the charts, here are a few words regarding the importance of knowing one’s index and/or ETF. (I promise this matters.)
AAPL is the largest fixture of the Nasdaq-100 and QQQ at about 11%. Google — made up of its Class A and Class C shares — is the second-largest holding. When an index’s two largest holdings are making notable moves higher, respect the price action. Because not only can it move the index itself higher in a meaningful way, but it can begin to “infect” other holdings.
GOOGL Stock Charts
On the multiyear weekly chart, we see that the major trend higher is taking place in a well-defined channel (black parallels). After reaching the upper end of the channel in early February of this year, GOOGL stock slipped into a bigger-picture consolidation phase that also allowed the stock to re-set and revisit the lower end of the channel. The rally in Alphabet that began in late June has since pushed shares back toward the upper end of trend. But they haven’t touched the upper trend line just yet.
In other words, all else being equal, GOOGL stock should have some upside left in it for the time being.
On the daily chart, we see that after Alphabet stock gapped higher in late July and overcame previous horizontal resistance (black horizontal), it settled into a consolidation phase as marked by the blue box. This consolidation phase, which is taking place above previous technical resistance, has allowed its moving averages to catch up. For example, we see that the yellow 50-day simple moving average currently matches up with the lower end of the consolidation phase. This adds at least a little more technical support.
When GOOGL stock finally cracks upward and out of this multiweek consolidation phase is anyone’s guess. But considering that big, round numbers can act as considerable technical resistance (or support), it does make sense that the stock is finding it difficult to clear this consolidation phase taking place around the $800 mark.
A daily close above $812 could trigger a next leg higher toward $840-$850.
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