Shares of Alphabet Inc (NASDAQ:GOOGL) ended in the black by less than 1% on Wednesday, but measured week-to-date, they’re nearly 5% off of their Monday lows. GOOGL stock lagged the broader market in the immediate days following last week’s election results. But after having reached a critical technical support area on Monday, Alphabet looks like it’s once again setting up better risk-reward trades to the long side.
When I last mused about Alphabet stock on Nov. 3, I said:
“Large-cap tech stocks and a few more of their peers were largely responsible for holding up the S&P 500 and broader U.S. stock market. As these stocks began to sway and stumble over the past few trading sessions, so too did the S&P 500. As such, Alphabet stock and their peers should be closely watched — not just for a gauge on the single names, but for clues to where the broader market is going next.”
I also said that GOOGL stock — just like Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) — still looked overbought and needed some more time to reach better-probability buying spots.
Since that point, all three stocks have reached those buying spots and began to bounce. These large-cap tech stocks did their best to hold up the broader U.S. market through the summer and into the first half of the autumn months, but after their respective earnings results, they settled into healthy consolidation phases.
Now, let’s look at why GOOGL shares are finally looking appealing once more:
GOOGL Stock Charts
Looking at the multiyear weekly chart, we see that Alphabet — despite having pulled back nicely in recent weeks — remains trading in the upper half of its multiyear uptrending channel.
This in and of itself does not mean that the stock ultimately has to trace back to the lower end of this channel, but for perspective, it is worth noting where Google is trading right now within its big-picture range.
Now that we have some perceptive from the weekly chart, let’s zoom in on the daily chart, where we will be able to define the risk-reward of today’s trade idea more closely.
From its pre-earnings highs in late October to this Monday’s lows, GOOGL stock “corrected” by about 11%. While that in and of itself is a respectable pullback for this stock, where it began to bounce is Monday is where the real key lies.
The $740-$760 area matched up with the red 200-day simple moving average, which had been a decent reference area for Alphabet stock for some time. Next, this confluence support area also lined up with a 50% retracement of the entire rally from the late June lows up into the late October highs. Furthermore, this retracement lower also satisfied a filling of the July 29 up-gap.
All in all — especially considering the bullish reversal that GOOGL stock put in on Monday and Tuesday — investors can feel good trying to play shares on the long slide against the $750. Use a first upside target around $820 over the next few weeks or even months.
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