{"id":3617,"date":"2024-04-27T00:03:28","date_gmt":"2024-04-27T00:03:28","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/04\/27\/analyzing-alphabets-surge-heres-how-to-get-in-earlier-next-time\/"},"modified":"2024-04-27T00:03:28","modified_gmt":"2024-04-27T00:03:28","slug":"analyzing-alphabets-surge-heres-how-to-get-in-earlier-next-time","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/04\/27\/analyzing-alphabets-surge-heres-how-to-get-in-earlier-next-time\/","title":{"rendered":"Analyzing Alphabet\u2019s Surge \u2014 Here\u2019s How to Get In Earlier Next Time"},"content":{"rendered":"
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Using technical indicators to identify stocks fundamentally undervalued<\/em> but technically strengthening is a common practice. But, using indicators to find fundamentally strong stocks that happen to be technically undervalued<\/em> (or contested) is probably less common, especially if you lean toward technicals.<\/p>\n

That was certainly the case with Alphabet Inc (GOOGL)<\/strong>, leading to Friday\u2019s 15% spike and price gap<\/a>, the sharpest rally since 2015. Alphabet\u2019s earnings and revenue results soared past Wall Street\u2019s expectations. But the extraordinary news was the declaration of the company\u2019s first-ever dividend (20 cents per share) and a $70 billion buyback, providing substantial benefits to shareholders.<\/span><\/p>\n

The dividend and buyback part was unpredictable. But the case for having bought (and held) GOOGL was present in the fundamentals and technicals, notably when the technicals indicated significant weakness.<\/p>\n<\/p>\n

FIGURE 1. DAILY CHART OF ALPHABET SINCE 2023. The Communications sector outperformed the S&P 500 consistently, while Alphabet began underperforming the sector toward the end of 2023.<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

Alphabet\u2019s StockCharts Technical Rank (SCTR)<\/a> scores at the beginning of 2023 were quite dismal, though the stock began picking up steam shortly after. Alphabet had a big earnings miss in February 2023, yet analysts would argue that the miss was \u201cbaked-in.\u201d<\/span><\/p>\n

The SCTR line started trending downward in October 2023, hitting consecutive lows in December of that year and, most recently, March, where the SCTR score plunged to a 10, an exceedingly bearish technical reading.<\/p>\n

Relative performance against its sector (XLC), would have confirmed Alphabet\u2019s relative weakness, as it grossly underperformed it by -10%.\u00a0 Meanwhile, XLC (the Communications sector proxy) steadily outperformed the S&P 500, as you can see in the chart above.<\/p>\n

All signs read \u201cbearish\u201d in bold letters, except for a couple of things:<\/p>\n

Fundamentally, its earnings performance after Feb 2023 had shown nothing but consecutive strength.
\nTechnically, Alphabet was in a strong uptrend <\/em>(and a long one) despite its sector underperformance and various other indications of technical weakness.<\/p>\n

So, was it technically undervalued, save for the one thing that perhaps mattered the most: the direction of the larger trend?<\/p>\n

Running Bullish Scans<\/h2>\n

For context, Alphabet came up on a scan for Outperforming SPY: 52-Week Relative Highs. It wasn\u2019t there yesterday. But if you did a quick Symbol Summary<\/a> search on Friday morning, you would have seen GOOGL pop up on several bullish scans.<\/span><\/p>\n<\/p>\n

FIGURE 2. PREDEFINED SCAN LISTING IN THE STOCKCHARTS SYMBOL SUMMARY TOOL. What a difference a day makes!<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

So, now that the retail crowd is joining those who have long been \u201clong,\u201d is it too late to jump in?<\/p>\n

It\u2019s a Wait-and-See Moment<\/h2>\n<\/p>\n

FIGURE 3. DAILY 6-MONTH CHART OF ALPHABET. Huge gap but mixed signals.<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

As a continuation gap, the odds of it getting filled within the week is around 8% (according to analyst Thomas Bulkowski\u2019s studies).<\/p>\n

Looking at the candle, you\u2019ll notice heavy selling (profit-taking?) occurred immediately after Friday\u2019s market opening. If you look at the coinciding volume bar, you\u2019ll see that selling activity outpaced buying activity.<\/p>\n

The Stochastic Oscillator<\/a> shows a slight divergence between it and the two consecutive highs in April. But <\/span>the Chaikin Money Flow (CMF)<\/a> paints a bullish picture of surging pressure among buyers.<\/span><\/p>\n

Given the mixed signals, it\u2019s a wait-and-see moment. If the gap gets filled, how close will the price get to $160, the previous high that may serve as support? If it falls through that level, what\u2019s the likelihood it might find support at the most recent swing low range near $150? And if Alphabet bounces in either spot, will there be enough volume and momentum to field its next leg upward?<\/p>\n

The Bottom Line<\/h2>\n

If you\u2019ve been bullish on Alphabet, the green light for loading up on the stock flashed well before the latest earnings shocker\u2014complete with its inaugural dividend and hefty buyback. Strangely enough, perhaps the apparent technical inconsistencies highlighted Alphabet\u2019s underlying strength. At this juncture, it\u2019s a game of watchful waiting to pinpoint the perfect entry point.<\/p>\n<\/p>\n

Disclaimer:<\/em><\/strong> This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.<\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Using technical indicators to identify stocks fundamentally undervalued but technically strengthening is a common practice. But, using indicators to find fundamentally strong stocks that happen to be technically undervalued (or contested) is probably less common, especially if you lean toward technicals. That was certainly the case with Alphabet Inc (GOOGL), leading to Friday\u2019s 15% spike […]<\/p>\n","protected":false},"author":0,"featured_media":3618,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-3617","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/3617","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=3617"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/3617\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/3618"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=3617"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=3617"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=3617"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}