While its FAANG companion Amazon.com (AMZN) - Get Report enjoyed a burst higher when it reported earnings last week, Alphabet investors aren't enjoying the same reaction. Shares are lower by 3.5% after the company beat on earnings but missed on revenue estimates.
Impressive growth in its YouTube and cloud divisions were overshadowed by the sales miss and as operating profit missed consensus estimates. While the takeaway is not outright bearish - it wasn’t a bad report necessarily - bulls aren't exactly rejoicing over the report.
Emphasizing this fact even more is the 1.2% rally in the S&P 500 Tuesday, as Alphabet stock can’t even gain traction amid a large broad-market rally. It makes it a fitting choice for Real Money’s Stock of the Day.
Trading Alphabet Stock
Alphabet topped out at $1,500 earlier this month, chopping just below that mark for several days before gapping down to the 20-day moving average. Shares bottomed near $1,420 on that gap down and began to rally again.
It was typical bullish action. However, the stock failed to notch a higher high, allowing a short-term downtrend mark to form (purple line). In its post-earnings action, Google is testing the bulls, as shares linger near $1,420 and the 20-day moving average.
A move below the recent low - at $1,419.50 - is not a purely bearish development. Granted, it’s not bullish, but allowing the stock to further unwind would not be the worst thing to happen. It would give dip-buying investors a chance to grab some shares near uptrend support (blue line) and the 50-day moving average.
Now if Alphabet stock breaks below the latter, then we need to start looking at some further downside levels.
Specifically, the $1,365 level stands out, as this level of resistance held GOOGL shares in check for all of December, before the stock broke out in January. A pullback to this zone that holds as support would certainly catch my interest. Below that and $1,330 is possible, followed by a retest of the big breakout zone between $1,295 and $1,300.
But let’s not get ahead of our skis here. For now, Alphabet stock is showing a reasonable pullback after a very impressive rally. Let’s see if the 20-day and $1,420 level hold as support. Above puts downtrend resistance and the $1,500 mark on the table. Below puts uptrend support and the 50-day moving average in the cards.