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Why Alphabet Inc (GOOGL) Stock Is a BEAR Trade After Earnings

Alphabet is a great company, and GOOGL stock probably has a quick rally coming. But the real opportunity is on the downside.

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Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) is scheduled to report earnings today after the bell amid this big week for large-cap tech stocks. Apple Inc. (NASDAQ:AAPL) and Twitter Inc (NYSE:TWTR) have already reported, and Amazon.com, Inc. (NASDAQ:AMZN) will join GOOGL stock in the earnings confessional.

Beat the Bell: Alphabet Inc (GOOGL) StockGOOGL stock has been showing relative strength of late, even compared to its sector. But like other large-cap technology stocks, Alphabet’s push has been increasingly sluggish in recent weeks.

My No. 1 rule for trading Alphabet after earnings: Don’t chase!

Before looking at the charts and mapping out technically important areas of support and resistance for GOOGL stock, let me be clear: I am a big believer in the intermediate- and long-term prospects of Alphabet. As growth as an investment story is increasingly difficult to come by, this company is a gem — and one that shouldn’t be underestimated. Its innovations and products continue to positively surprise its followers and investors.

Considering Alphabet’s wide reach into technology and into our everyday lives, it’s hard to imagine the trend will end soon.

As it stands, Alphabet’s A and C shares (GOOGL and GOOG) combined make up just north of 9% of the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ). Thus, any meaningful move in Alphabet will likely have a notable effect on the Nasdaq-100.

GOOGL Stock Charts

If you look at the multiyear weekly chart, you’ll see that Alphabet stock has mostly pushed higher within a well-defined channel. The lower end of the channel comes in around its 50- and 100-week simple moving averages (yellow and blue lines, respectively). This is where the better longer-term buying opportunities exist.

googlweekly
Click to Enlarge

We also see that, thanks to the most recent rally in GOOGL stock off the late June lows, shares are once again pushing toward the upper end of this channel. This is where the risk-reward formula for the longs gets week.

Also note that the MACD momentum oscillator, while pointing higher, still is far from making new momentum highs versus the 2015 momentum highs. However, price did edge to new highs earlier this week. This negative divergence, while no catastrophe, doesn’t favor chasing GOOGL stock at these levels for the time being.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/10/alphabet-inc-googl-stock-bear-trade-iplace/.

©2017 InvestorPlace Media, LLC