For a Street always searching for transparency, earnings from Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) fell well short of delivering those results. And on the GOOGL stock price chart, investors’ collective answer to the report is crystal clear and sets shares up for a bearish position today. Let me explain.
What a difference a day can make when it comes to corporate confessionals and investor reaction. Such was the case for GOOGL stock following its surprisingly weak Q1 results and decisive punishing reaction on the price chart.
Tuesday’s session saw shares of the tech behemoth crater by 7.5% after announcing quarterly revenue which missed Street forecasts and saw sales growth decelerate below key levels across all categories with no clear cause behind the unwanted affect. The pessimism continued into Wednesday
Not surprising, some mystified and miffed analysts took to the streets in their pin-striped riot gear. Nomura Instinet expressed Alphabet’s forward expectations will undoubtedly be reset lower and GOOGL stock should trade sideways until the reasons behind its weak results become clear.
Likewise, but a bit more bearishly decisive, J.P. Morgan stated shares should be under pressure near-term given Alphabet’s sub-20% sales growth, downward earnings revisions and likely increasing investor frustration over the company’s lack of transparency.
GOOGL Stock Weekly Chart
What difference can a day make? On the GOOGL stock chart, it’s really more about how the weekly chart, rather than the daily chart, is setting up. And that price action has gone from good to potentially very bad overnight.
Leading into the report, Alphabet shares had been in a very constructive-looking uptrend for the past few months following the market’s ubiquitous corrective bottom. Adding to that confidence, Alphabet investors even established a confident, albeit marginal, breakout to fresh highs immediately prior to earnings.
But now it’s the bears’ turn to take control of GOOGL stock. Tuesday’s technical backlash, along with the uncertainty surrounding the company’s revenue picture, puts Alphabet stock at risk of a much larger correction.
On the weekly view, shares have formed an engulfing bearish candlestick. With the price action also marking a narrow fresh high, a meaningful double-top pattern is setting up. In conjunction with a fragile overbought stochastics condition, that’s bad news for bullish Alphabet investors.
What’s more, as illustrated we can see GOOGL stock has set up a broadening formation or inverse triangle on the weekly chart. From here, the next meaningful leg would be for shares to move aggressively lower towards $900-$950 before finding potential price support.
The one key technical support GOOGL stock bulls have right now is the obvious importance of the $1,200 area on the price chart from both a psychological whole number perspective, as well as being (for all intents and purposes) a prior high. Bottom-line though? With a questionable top-line and Alphabet’s squiggly-line on the weekly chart pointing lower, everything is in place for a bearish trade in Alphabet today.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
