Alphabet Inc. (GOOGL) made a high on the price charts at the end of July and after a painful $286 correction it is ready to rally again. The decline has been slowing since the middle of October but if you went long above $1,200 that has been no consolation. The lagging indicators like moving averages are still bearish but our leading indicators like momentum and the On-Balance-Volume (OBV) line argue for a turn to the topside. Let's stay after school for some tutoring on the charts.
In this daily bar chart of GOOGL, below, we can see the four-month decline in price. GOOGL makes an intraday low at the end of October and a retest of that nadir last week. Prices have inched higher and just need a little more strength to break the downtrend. Yes prices are below the declining 50-day moving average line and the slightly bearish 200-day average line. A belated death cross can be seen earlier this month. The daily On-Balance-Volume (OBV) line declined from August but this month it looks like it is bottoming and is about to break its downtrend. The Moving Average Convergence Divergence (MACD) oscillator crossed to the upside in early November for a cover shorts buy signal.
In this weekly Japanese Candlestick chart, below, we can a number of lower shadows in the $1,050 to $1,000 area. The $1,000 area is meaningful support as it acted as resistance in 2017 and then as support earlier this year. Last week's bearish candle is followed by this week's (so far) spinning top for a harami pattern. This reversal pattern is sort of like an inside day or inside week. Prices are below the declining 40-week moving average line but we know that is a lagging indicator. The weekly OBV line looks poised to turn up and the weekly MACD oscillator has started to narrow.
In this Point and Figure chart of GOOGL, below, we can see that a trade at $1,110 will be a double top breakout.
Bottom line strategy: Aggressive traders could go long GOOGL on strength above $1,075 and add above $1,110. Risk below $1,025. Hold for the Santa Claus rally.
