Alphabet (GOOGL) - Get Reportis the weakest stock among the four called FANG. Netflix (NFLX) - Get Reportis the only one to report earnings and when they did on July 17, the stock began a move called a parabolic. That's when new highs beget higher highs until a bubble breaks.
When you spell FANG, Alphabet, the Google letter, is the only one of the four, not to set a new high in July, making earnings important.
Alphabet has a similar chart setup before it reports its quarterly results after the closing bell Monday. The stock closed Friday at $993.84, knocking on the door of a breakout to a new high. My target on such a move is my quarterly risky level at $1,056.96.
Despite being the weakest FANG, Alphabet is up 25.4% year to date and is in bull market territory 33.7% above its post-election low of $743.59 set on Nov. 14. Analysts expect the company to earn between $8.20 and $8.25 a share for its quarter ended on June 30. The stock is covered by 25 analysts with 19 strong buy ratings, three buy ratings, and three hold ratings. Keys noted are advertising dollars and strong growth in cloud computing.
My focus is on the weekly chart for Alphabet but it's important to note that the stock has been above a "golden cross" since Aug. 17 on its daily chart. This occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating higher prices lie ahead. This signal tracked the stock from $805.42 on Aug. 17 to the current all-time high of $1,008.61 set on June 6.
Odds favor an upside breakout to the upside for Alphabet.
The Weekly Chart for Alphabet
Courtesy of MetaStock Xenith
The weekly chart for Alphabet is positive but overbought with the stock above its five-week modified moving average (in red) at $961.98. The 200-week simple moving average or "reversion to the mean" (in green) is $675.68.
The "reversion to the mean" is an investment theory that the price of a stock will eventually return to a longer-term simple moving average, and the 200-week is simple to track. A ticker trading above its "reversion to the mean" will eventually decline back to it on weakness. Similarly, a ticker trading below its "reversion to the mean" will eventually rebound to it on strength.
For Alphabet, the 200-week simple moving average was last tested during the week of Oct. 7, 2011, when the average was $249.87.
The 12x3x3 weekly slow stochastic reading ended last week at 72.70, up slightly from 72.14 on July 14.
Trading Strategy: Buy weakness to my semiannual and annual value levels of $944.79 and $899.21, respectively. Reduce holdings on strength to my quarterly risky level of $1,056.96.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.