Internet content giant Alphabet Inc. (GOOGL) has had a volatile up and down ride during the first half of 2018, but weakness has provided buying opportunities every time. On weakness throughout the first half of 2018, the stock held its 200-day simple moving average and my semiannual value level of $987.07.
On initial 2018 strength, Alphabet set its all-time intraday high of $1,198.00 on Jan. 29. At that time, the weekly chart showed the stock as an “inflating parabolic bubble.” This warning led to a correction of 16.8% to a low of $997.00 on Feb. 9. This proved to be a buying opportunity at the 200-day simple moving average of $1,003.38. Alphabet shares then rebounded by 18.2% to a secondary high of $1,178.16 on March 12. (See also: Google Poised for Mobile-Search-Powered Growth.)
However, the downside volatility was not over, as the stock had a second correction, this time with a decline of 16.5% to its 2018 low of $984.00 set on March 26. This was another buying opportunity at my semiannual value level of $987.07. Between March 26 and May 4, the stock traded back and forth around its 200-day simple moving average as it rose from $1,024.11 to $1,034.69. The stock has been above its quarterly pivot of $1,054.64 since May 9 as momentum rose again on the weekly chart. Alphabet shares closed at $1,160.11 on Thursday, June 14, up 10.1% year to date and up 17.9% from the March 26 low of $984.00. The stock is just 3.2% below its Jan. 29 all-time high of $1,198.00.
The daily chart for Alphabet
Courtesy of MetaStock Xenith
The daily chart for Alphabet shows the importance of a rising 200-day simple moving average, which has marked the uptrend, as the stock began the year above a “golden cross,” indicating that higher prices would occur. The two lower horizontal lines are the semiannual and annual value levels of $987.07 and $966.02, respectively, but beware that a new semiannual level will be calculated for the second half of 2018. The quarterly pivot of $1,054.64 and the monthly risky level of $1,173.94 will also be revised in July.[Check out Chapter 2 of the Technical Analysis course on the Investopedia Academy to learn more about using moving averages to develop your trading strategy]
The weekly chart for Alphabet
Courtesy of MetaStock Xenith
The weekly chart for Alphabet is positive, with the stock above its five-week modified moving average of $1,106.78. The 200-week simple moving average, or its “reversion to the mean,” is at $792.02. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 65.91, up from 55.79 on June 8.
Given these charts and analysis, investors should buy Alphabet shares on weakness to my semiannual and annual value levels of $987.07 and $966.02, respectively, and reduce holdings on strength to my monthly risky level of $1,173.94. (For more, see: Why the FAANGs’ Hot Streak May End Soon.)