On Tuesday, Alphabet (GOOGL) closed at an all-time high. So did Facebook (FB) and Amazon (AMZN) . It was a three-run homer for the FANG stocks, with only an earnings miss by Netflix (NFLX) preventing a grand slam. For its part, Netflix was resilient yesterday, bouncing from a low of $344 to close at $379.
However, according to Wednesday's headlines, all is not well with FANG. The European Union has hammered Alphabet's Google with a record $5 billion antitrust fine. According to the EU, the company is dominating its competitors by abusing Android's status as the most popular mobile operating system in the world.
A $5 billion fine would serve as a death blow to most companies, but not in this case. Alphabet has over $100 billion in cash, so the company can easily handle the E.U.'s penalty. Google has already made clear that it will appeal the decision.
According to the weekly chart of the Alphabet Inc. Class A shares, this stock could be about to move higher. That's because GOOGL has formed an inverted head and shoulders (L-H-R) pattern (semicircles). When this pattern appears in an uptrend, it indicates a continuation of the prior direction of the instrument. Using a measuring technique, this chart projects GOOGL to the $1320 area.
Notice how GOOGL's 50-week moving average is supporting the stock (arrows). The stock's 50-week and 200-week (red) moving averages continue to slope higher, an indication of a long-term uptrend. That trend has been intact since the market bottom of 2009, and there is nothing to indicate an imminent change in GOOGL's trend. Everything about this chart indicates that the stock is going higher.
For those who are wondering, there is no indication that the current trade dispute between the U.S. and the E.U. has anything to do with this fine. The E.U. has levied fines against Apple (AAPL) in recent years, prior to any disagreement over trade. Back in 2004, the E.U. fined Microsoft (MSFT) $670 million, which the company eventually paid.
When Microsoft dropped on news of that fine, it proved to be a solid buying opportunity. Today's announcement does nothing to change my bullish stance on this stock, and I'd use any pullback in GOOGL to add to my long position.
(Alphabet, Facebook, Amazon, Apple and Microsoft are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GOOGL, FB, AMZN, AAPL or MSFT? Learn more now.)
(An earlier version of this column appeared on Real Money Pro at 10:35 am, our site for active stock and options traders. Click here to get more columns and trade ideas like this from Ponsi, Mark Sebastian, Doug Kass and others.)