It’s been a rough run in tech, as companies big and small continue to struggle. The latest selling pressure has even hit the FAANG stocks.
At one point, Alphabet (GOOGL) (GOOG), Apple (AAPL) and Microsoft (MSFT) were the cream of the crop. The three stocks were holding up better than almost any other tech stock and they had the balance sheets to back up the performances.
Fast forward a couple of months, and only Apple is left.
Microsoft and Alphabet are now making new lows. So are Meta (META) and Nvidia (NVDA).
We looked at Nvidia yesterday, so now let’s look at Alphabet.
Trading Alphabet Stock
Chart courtesy of TrendSpider.com
Alphabet, Google's parent, has strong cash flow, a robust balance sheet — with $125 billion in cash and short-term investments — and stellar assets in Google.com and YouTube.com, among others.
Quite frankly, the stock is on sale. The shares are down 33% from the all-time high made in February. For comparison, Alphabet stock fell 34% during the panic selling of covid-19.
In fact, just once more in the past 12 years has it fallen more than 30%, with the other incident occurring in 2010 when it fell 31%.
Purely from a historical peak-to-trough price-action perspective, this gives a pretty good sense of the action we’re seeing now. It may also lend a bit of confidence to leery investors.
When I look at the weekly chart above, the $105 and $100 levels stand out to me.
The $105 mark was a big breakout level in 2021 and it’s no surprise that it’s been strong support so far in 2022. But while the stock was biding its time for that breakout in 2021, $100 was strong support.
Now that $105 is failing as support — as is the monthly VWAP measure — it will be interesting to see whether Alphabet stock finds support at the $100 mark. This area is the first real area of support I'm focusing on.
If Alphabet holds this zone and reclaims $105 — the setup to watch now as opposed to just blindly backing up the truck near $100 — it’s possible we have a low to work with.
If it doesn’t hold as support, however, we could see the $90 level.
The $90 area is my second support zone to watch. Not only was this area also a prior breakout zone, it’s where the stock finds its rising 200-week moving average.
For those interested in Fibonacci extensions and retracements, it’s also where we find the 161.8% extension from the “D” leg high of roughly $122.50 to the “C” leg low near $102.
Put it all together and we have a 33% pullback to an area of prior interest, followed by a potential 40% correction to another big area of possible support.
If we see the latter occur, it’s hard to ignore it as a long-term buyer.
