I generally try to avoid reading too much into any one move in the markets. The overall picture carries greater weight than any trader’s speculative action. That said, I’m willing to make a small exception for Alphabet Inc. (NASDAQ:GOOGL, NASDAQ:GOOG). On Wednesday, the Google stock price closed up 2.4% against the prior session. In one move, GOOGL reaffirmed its bullish case.

Prior to Wednesday, Alphabet wasn’t really in a chipper mood.

Between the first of June until September 26th, the GOOGL stock price fell more than 5%. Despite its seemingly indestructible armor and its vast business empire, the internet giant couldn’t convert these factors into market profitability. Technical analysts argued that the company was losing steam at a critical juncture.

In mid-August, InvestorPlace contributor Ian Bezek noted that the Google stock price “hit $1,000/share on two occasions, and failed to make new highs.” In technical-analysis language, this setup is called a “double top,” and signifies that bullish sentiment is fading. Furthermore, Bezek wrote that traders psychologically gravitate towards these large, round numbers. Having two “aborted rallies at such a distinctive level diminish enthusiasm for the stock.”

The technical weakness in the GOOGL stock price also came at a painfully-awkward moment. Our own Joseph Hargett summed up the problem:

“GOOGL stock went through a rough patch following a PR disaster back in early August. You might remember the Alphabet engineer who shared a politically charged 3,000-word document stating diversity work ‘alienates non-progressives,’ and that biological differences ‘explain why we don’t see equal representation of women in tech and leadership.'”

For a while, it appeared as though GOOGL shares would meander aimlessly indefinitely. But the sudden buy action may have signaled that its past problems are fully baked into the Google stock price.

Bullish Momentum returning for GOOGL

For one thing, GOOGL doesn’t make large, single-day moves any more and certainly not this year. The average day-over-day performance in 2017 is a measly 0.11%. Since up-days substantially outnumber down-days, this suggests that Alphabet trading has been slow and measured.

In fact, the biggest single-day performance this year was 3.7%, back in April 28. Wednesday’s 2.4% gain is so far the second-biggest move. Considering that Alphabet’s price action is so painfully pedestrian, investors should watch for a bullish resurgence. Magnify this statement ten-fold if you’re short GOOGL shares.

On a five-year chart, I see what every buy-and-holder wants to see: a rising channel featuring higher highs, and higher lows. Rarely has the Google stock price broken down below commonly-viewed gauges, such as the 200 day moving average. When it has, such as in 2014, GOOGL eventually bounced back stronger than ever.

We should also look at the company not just in terms of quantity of positive arguments, but also the negatives. In other words, is there enough to justify going the opposite direction?

If I were to short a stock, the target organization must have critical vulnerabilities that it cannot overcome. I’d look at Snap Inc. (NYSE:SNAP) for its overvaluation against a questionable product. Chesapeake Energy Corp. (NYSE:CHK) is a definite short candidate for its terrible finances and its ugly underlining market. My favorite is Under Armour Inc (NYSE:UAA) for all of the above.

But Alphabet? For dominating global search engines and largely anything to do with the internet? I can’t get there. And if GOOGL isn’t a short, it’s worth considering as a buy.

 

Alphabet has Problems, Not Crises

Let’s just be real: Google isn’t going to move sideways in the markets forever. One way or another, it will have a strong directional move. The tendency, of course, is that it will resume its remarkable run. For shares to collapse requires an unprecedentedly catastrophic event.

I’m not suggesting that Alphabet doesn’t have problems because it does. The firm is embroiled in legal battles, most notably an European Union antitrust action. As InvestorPlace’s Vince Martin stresses, the changing dynamic of smart devices negatively impacts Google’s ad business. Our colleague Will Ashworth states that management needs to focus particularly after a series of questionable decisions.

In the bigger picture, I see these factors as annoyances. True, they can coalesce and transform into a greater challenge. But so far, the evidence that these problems can do more than stymie the Google stock price for months at a time is lacking. Like any major company, they face turbulence but I’m not losing any sleep over it.

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