OK, gang, I'm not going to sugarcoat this, and I'm not going to tell you what you should do. I am going to tell you that I am long Alphabet (GOOGL) , and how I am approaching the management of this position as we head toward the opening bell. The green arrow is the last sale in the overnight trading session as I write this piece. That arrow is meant to be close to $1135.
For one, I am up nicely in this name, as likely are most who are involved, even at this last sale. What that means is that I will take a couple of punches before I even think of adding, or cutting the name loose. The name is coming out of a technically overbought condition (What isn't?). That's not going to help. The daily moving average convergence divergence (MACD) looked like it was about to go experience a bearish crossover last night. It will on the open, and the nine-day exponential moving average (EMA) will likely submerge below the zero bound.
Two things stick out to this old dog. The pre-opening last sale is currently right around the lower trend line of the Pitchfork model. That line cracks, and then what? Oh, look, a 38.2% re-tracement of the September through January move, and the 50-day simple moving average (SMA) seem to be within pennies of each other. Hmm. That spot, at least to me, seems like it might just be a good place to find concealment, and set up an ambush.
You kids do what you want. I'll take this challenge. The stock opens above the $1135 level, and holds, I do nothing. The spot cracks and fails on one re-test, I sell. The name contracts further, $1092 becomes my targeted point of entry. Right or wrong, I'm taking the next two days off.
(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)
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At the time of publication, Stephen Guilfoyle was long GOOGL, although positions may change at any time.