GOOG Stock: Bearish Headwinds

Alphabet Inc (NASDAQ:GOOG) stock has a cult following, as it should, considering that this company has created great wealth for those who identified GOOG stock as a great investment.

Google stock made a new all-time high in October as shares hit $816.68, and I was expecting—and hoping for—more of a follow-through. The lack of follow-through, coupled with the price action that followed, has raised some concerns with regards to the trend in Google stock. Now GOOG stock is negative on the October results, and market indices are all under selling pressure.

The market indices have been trading sideways for the last two months, but market breadth has been decisively negative, and new lows have been outpacing new highs. This deterioration of the internals began in September, and it seems like it will not end until the indices wash out and test lower levels.

The selling pressure that is mounting could be caused by the uncertainty with regards to the presidential election and the looming fed rate hike. Both events can cause distinctive shifts in macroeconomic policy, and this can have dramatic effects on markets and the economy.




Until these uncertainties are resolved, the markets will remain under pressure and the path of least resistance will be lower. I would be looking for key levels of support in GOOG stock that could help me define the bigger-picture view on this investment.

The following Google stock chart illustrates the price action that initially raised some concern.

Chart courtesy of StockCharts.com

Google stock was trading in a tight consolidation range that was defined by two parallel lines highlighted in blue above. In October, GOOG stock broke above this channel, and this indicated that a new trending phase was set to begin. The price action quickly failed, and this failure is the cause for my concerns. Even though the selling pressure is marketwide, this pattern is still a failure, and lower prices are now expected.

The 200-day moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When the share price is above the moving average, it is bullish; when the share price is below the moving average, it is bearish. It is not uncommon for this moving average to act as support as it is tested from above. This would be the first place I would be looking at to find possible price support.

The following Google stock chart is the most important, as it illustrates the only trend line that matters.

Chart courtesy of StockCharts.com

The Google stock chart above illustrates the uptrend that has supported the price since GOOG stock first went public and began trading. The trend line is created by connecting the valleys on the price chart, and it symbolizes the entire bull market in Google stock. This chart is simply beautiful, as it moves from the lower left to the upper right.

The financial crisis in 2009 set off panic selling, and this trend line was born when Google stock finally bottomed. Google stock has never traded below this trend line, but it has tested it on many occasions. Buyers have continually supported the stock as the price tested this trend line. This line should act as support if it is tested once again, but a failure to hold this level might indicate that something more sinister is going on.

The Bottom Line on Google Stock

Market turmoil caused by uncertainty with regards to the presidential election and looming interest rate hikes have caused broad-based market weakness. The failed breakout is my primary cause for concern, and I am looking for levels of support that could halt Google stock’s slide. I would reduce my position in GOOG stock, hoping to re-enter at support or when conditions become more favorable.

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