Internet content giant Alphabet Inc. (GOOGL - Get Report) spiked higher in after-hours trading then plunged nearly 7% to its reaction low. The price action so far Tuesday is back between its 200-day simple moving average at $1,127.67 and my annual pivot at $1,143.21 giving buyers an investor "Mulligan".
A "Mulligan" is a term in golf where a golfer takes a do-over after a bad shot.
Alphabet was posed for a positive reaction to earnings at the close of $1,141.42 on Monday, Feb. 4. After hours the stock popped to $1,178.00 on the headline news that Alphabet earned $12.77 per share easily beating the consensus of $11.08. This resulted in a four-quarter winning streak. When it became known that the so-called "cost per click" in search was rising and given the plan to increase spending, investors panicked and sold the stock down to as low as $1,098.00, a quick decline of 6.8%. At the low, investors could have bought the stock at my weekly value level of $1,104.14.
The stock closed Monday at $1,141.42, up 9.2% so far in 2019 and in correction territory 11.8% below its all-time intraday high of $1,291.44 set on July 27. The stock set its 2018 low of $977.66 on Dec. 24 and is up 16.8% since then. At the low, the stock dipped into bear market territory, so a rebound was highly likely.
Shares were up 1.16% Tuesday.
A key to buying Alphabet is the return of technical momentum and the 12x3x3 weekly slow stochastic reading has been rising since the New Year began.
Other positives to consider are the growth from YouTube, Google's cloud and device offerings such as Google Pixel 3 smart phone.
The Daily Chart for Alphabet
Courtesy of MetaStock Xenith
The daily chart for Alphabet does not show the after-hours high of $1,178.00 and does not show the after-hours low of $1,098.00. What's important is that the stock is above its 200-day simple moving average at $1,127.67 as a buying opportunity. Today's high was just shy of my annual pivot of $1,143.21. The stock closed 2018 at $1,044.96, which was the year-end input to my proprietary analytics. These set the horizontal lines for my annual, semiannual and quarterly risky levels at $1,143.21, $1,250.72 and $1,267.09, respectively. The close of $1,125.89 on Jan. 31 established my monthly risky level for February at $1,187.17. My weekly value level is $1,104.14.
The Weekly Chart for Alphabet
Courtesy of MetaStock Xenith
The weekly chart for Alphabet has been positive since the first week of 2019. The stock is above its five-week modified moving average of $1,095.66. The 200-week simple moving average, or "reversion to the mean," is at $891.01. The 12x3x3 weekly slow stochastic reading is projected to rise to 71.55 this week up from 63.59 on Feb. 1. This remains a reason to be long.
Trading Strategy: Buy Alphabet down to its 200-day simple moving average at $1,127.67 and add to positions on weakness to my weekly value level of $1,104.14. Reduce holdings on strength to my semiannual and quarterly risky levels at $1,250.72 and $1,267.09, respectively. A weekly close above my annual pivot at $1,143.21 will continue the renewed momentum run-up for the stock.