It appeared as if Wall St. was not impressed with Alphabet’s (GOOGL) earnings report yesterday, but that may prove to be very good news.
The general reaction to the GOOGL’s earnings report was one of disappointment despite beating its revenue estimates. The concern from bearish analysts was focused on its rising costs and lower margins.
Some analysts raised their price targets, others lowered them.
This may not seem bullish, but it can be, and…
The price action was bullish. It opened lower and then closed on the high of the day and over the prior day’s high.
More importantly it’s breaking out over its 200-day moving average and a four month base.
This sets up the potential for a quiet breakout.
A quiet breakout is a break over a big resistance level that doesn’t seem to attract much attention. There isn’t a big volatile day. Instead, the stock moves steadily higher.
I don’t like to rely on one day’s reaction to news to determine a potential trend, so I’d like to see GOOGL continue higher and trade above $1,160. If
it does, then GOOGL looks like a buying opportunity with a stop under its 200-day moving average and recent lows. Under $1,115 would be my choice.
Since the QQQ and SPY are right under their 200-day moving averages this would be a logical time to expect the market to pull back. In the event of a market pullback look for GOOGL to hold support above the $1,115 level.
If market pull back does not pull GOOGL below $1,115, then any subsequent breakout over $1,160 is even more bullish.
Additionally, if the market pulls back and GOOGL doesn’t break below the $1,115 level then it could be a sign that the market pullback is likely to be a small one.
So even if you don’t want to trade GOOGL, keep an eye on it as an indicator of the health of the current rally in the QQQ.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation