Chart of the day: can Alphabet Google make its way to profit?

Google (NASDAQ 🙂 parent company Alphabet (NASDAQ 🙂 is released today after the closing bell. Earnings per share are estimated to be $ 8.04 and $ 37.7 billion in revenues, down from the same quarter last year when it reported $ 14.21 in EPS on $ 38.94 billion in revenues.

The company's earnings were patchy, with two misses in the past five quarters. Revenues were worse, with three misses in the past five quarters. The tricky part of trying to get a handle on a stock like Google is that it has to do with conflicting market factors.

Will Google's stock price take advantage of a "stay-at-home" world where most people spend most of their time working, shopping, and getting their entertainment online? Or will Google's main revenue stream – ad dollars – dry up as advertisers tighten their wallets?

There are enough moving parts to give any poor analyst a headache.

Let's see what the chart says.

NASDAQ Alphabet A Shares

Google was indecisive for two months between early May and early July. The bulls managed to push the stock out of the swamp after news of the company joining the "$ 1 Trillion Club" when market capitalization hit this threshold, showing resilience in the face of the pandemic. The IBD SmartSelect Composite Rating of the stock rose from 93 a day earlier to 93.

Price

Still, the stock varied by only 1.7% since 6 July Such congestions may be signs of a reversal. The current range in effect since July 6 could reach its peak and that would put a much larger pattern of H&S reversals on the target.

The short MA of the MACD fell below the long MA, as the price of the stock has weakened.

Volume

Volume is attenuated, below 20 DMA. The only volume peaks within the larger pattern formation were on down days.

The volume oscillator has broken off and found resistance due to the broken upward trend line.

Momentum

The RSI is moving in the opposite direction, as momentum drops as the price rises.

Note

To clarify, the trend is still rising, both in terms of peaks and troughs, and with respect to the upward trendline. We do not know that the price will change course. We simply point out that the trend is faltering. Reversal requires the smaller, rather than the larger, pattern to complete.

Trading Strategies

Conservative traders would await the completion of the larger H&S summit.

Moderate traders may be satisfied with a downward breach of the smaller pattern, preferably with the uptrend line.

Aggressive traders may now risk short, provided they understand the risk of a trade and embrace only a small portion of their total trading range and have the temperament to resist this risk.

Trade Example – Aggressive Short Position

Entry: $ 1,575 – at a rally
Stop-Loss: $ 1,585
Risk: $ 10
Target: $ 1,475
Reward: $ 100
Risk-reward ratio: 1:10

Note: This is an aggressive trade, only suitable for traders who understand portfolio allocation and risk management. If you are not, do not act. Also, the components of the trade are not set in stone. Change them to suit your needs and if you don't know how to do it, don't act. If you don't understand the post, don't act.

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