Chart of the day: recent bullishness suggests that alphabet advertising sales recovered

If Google & # 39; s (NASDAQ 🙂 Alphabet & # 39; s ad sales growth is in a downward trend, why is the stock in a rising trend?

Alphabet is released Thursday after the bell, with analysts expecting earnings per share of $ 11.1 and sales of $ 38.16 billion. In the second quarter of last year, the company posted earnings per share of $ 11.75, easily exceeding the $ 9.64 forecast and revenue of $ 32.66 billion, well above the $ 25.58 billion forecast. But that was last year. 2019 started very differently, with the first quarter a major disappointment that led to a stock tank of the digital advertising giant with no less than 20%.

The company's 1Q report in April, which came after a period of phenomenal growth in advertising sales, showed that advertising sales growth had slowed down to 15%, compared to 20% in the previous quarter and 24% lower than in the same quarter in the previous year. It marked the slowest expansion of advertising sales in more than three years, suggesting that the increasing pressure from the increased competition in digital advertising caused inventory to fall by 7% the next day.

But investors are now buying the stock again: the price has earned back about half of its losses after the first quarter and closed at $ 1,138.07 yesterday, compared to the 3 June low of $ 1,025. Thus, given that digital advertising sales accounted for 85% of Google's Alphabet sales in the first quarter – and the growth in advertising sales was already tearing up – why would investors collect shares before earnings follow-up, as predicted in the chart of the company?

Alphabet Class Daily graph

Prices have been rising steadily within a rising channel since heading Q1 20% dive and mating, starting last week, half that correction.

The final stage in the rally crossed the 200 DMA and added weight to the evidence that the prize has set its sights on the April highs prior to the previous report, thereby prolonging the medium-term upward trend.

The RSI bounced above its upward line for the same time, and before the price reached the bottom of its rising channel.

The short MA of the MACD has fallen to the long MA. The move of the RSI suggests, however, that his shorter MA could also bounce off his long MA, as at the end of June along with the previous stage in the rally.

The price has yet to recover from the almost falling market, 19.5%. That pulled the 50 DMA below the 200 DMA, which strictly speaking triggers a death cross, but it is limited by the fact that the 200 DMA is flat. A falling 200 DMA would have been a stronger signal.

Meanwhile, the price found resistance through the 100 DMA, because it was in line with the top of the rising channel: a resistance, because it indicates where buyers take profits, increase supply and lower demand. If Alphabet actually shakes the perception that it has reached a ceiling for its growth in advertising sales, the price will continue in its upward trajectory, crossing the 100 DMA and withdrawing the 50 DMA above the 200 DMA, giving it support.

Trade Strategies

Conservative traders can wait for a new opportunity before the price rises halfway through the next peak.

Moderate traders can wait for a more complete correction in the direction of the channel bottom, enhanced by the 200 DMA.

Aggressive traders can take a long position at will, after having calculated a minimum 1: 3 risk ratio together with feasible support resistance points.

Trade sample: immediately

To prevent him from being eliminated, the trader assumes a significant exposure, requiring him to wait for a large movement to justify the risk of his position.

Admission: $ 1,138
Stop loss: $ 1,113 – upward line
Risk: $ 25
Target: $ 1,213
Reward: $ 75
Risk-reward ratio: 1: 3

Commercial example: Patience

Waiting for a deeper correction to allow for a closer stop loss, runs the risk of losing the position altogether. If the trader does not like the large exposure and is worried about losing the position, he would do well to wait for another, more reliable position. A good analysis does not promise a good exchange.

Admission: $ 1,115 – 200 DMA
Stop loss: $ $ 1,111 – upward line
Risk: $ 4
Target: $ 1,127 (Another target would achieve a great RRR)
Reward: $ 12
Risk-reward ratio: 1: 3

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