Alphabet Inc. (NASDAQ:GOOG) Time to Buy?

Alphabet Inc. (NASDAQ:GOOG) Time to Buy?

Alphabet Inc. (NASDAQ:GOOG) Time to Buy?

At the end of October, Alphabet (NASDAQ:GOOGL) lost ground after the firm’s Q3 results disappointed investors. While the firm’s revenue came in above expectations, its EPS dropped to $10.12 from $13.06 in the year-ago quarter. That was a much steeper drop than analysts had been expecting, which sent Google stock more than 4% lower in just a few hours.

When you take those two major one-time losses out of the equation, Alphabet’s operating income actually beat last year’s figures. That rationalization prompted investors to return to Google and drive the share price higher. 

But are investors overlooking a deeper weakness in Alphabet’s future growth story? Google exec David Drummond’s actions suggest as much. Drummond, Alphabet’s Senior Vice President of Corporate Development and Chief Legal Officer, sold $27 million worth of Google stock on Nov. 1. 

Of course, insiders buy and sell their stock options all the time, and Drummond could be rebalancing his portfolio or he might need capital for an upcoming purchase, but that kind of major sale by someone in Google’s executive suite is enough to make investors question whether the firm’s future is on solid footing.

Bank of America analyst Justin Post pointed to a comment by Google CFO Ruth Porat during the Q3 earnings call as reason to be skeptical. Her comment that, “there would be variability in year-on-year revenue growth rates from quarter to quarter” signals trouble ahead. He said that rhetoric was similar to what was said during the firm’s Q4 call— Alphabet then went out to post a Q1 revenue miss.

Plus, the Q3 results confirmed a worrying upward trend in Google’s traffic acquisition costs. The firm has having to shell out more and more to drive traffic to its sites and collect advertising revenue. 

The Bottom Line on Google Stock

For now, Google’s advertising business is generating enough cash to fund future growth projects. However, there’s some question as to how much longer that can continue.

The fact that David Drummond, who works closely with the firm’s legal issues, is selling now is certainly worrying from an investment standpoint. While it doesn’t make Google stock a sell, it should at least prompt investors to proceed with caution.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 1,244.23.

The projected upper bound is: 1,375.39.

The projected lower bound is: 1,299.55.

The projected closing price is: 1,337.47.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 32 white candles and 18 black candles for a net of 14 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 66.3960. This is not an overbought or oversold reading. The last signal was a sell 5 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 73.27. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 4 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 144.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 23 period(s) ago.

Rex Takasugi – TD Profile

ALPHABET INC C closed up 23.410 at 1,334.870. Volume was 30% above average (neutral) and Bollinger Bands were 1% narrower than normal.

Open High Low Close Volume___
1,318.9401,334.8801,314.2801,334.870 1,782,955

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 1,303.78 1,246.29 1,179.57
Volatility: 15 19 30
Volume: 1,314,795 1,326,488 1,438,372

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

ALPHABET INC C is currently 13.2% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GOOG.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on GOOG.O and have had this outlook for the last 22 periods. Our momentum oscillator is currently indicating that GOOG.O is currently in an overbought condition.

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