Tech Stock Sensei

Beware The Bear Flag On This Tech Giant

Alphabet, Inc. is a holding company, which engages in the business of acquisition and operation of different companies. It operates through the Google and Other Bets segments. The Google segment includes its main Internet products such as ads, Android, Chrome, hardware, Google Cloud, Google Maps, Google Play, Search, and YouTube. The Other Bets segment consists of businesses such as Access, Calico, CapitalG, GV, Verily, Waymo, and X.

Take a look at the 6-month chart of Alphabet (NASDAQ: GOOG) below with the added notations:

Chart of (GOOG) provided by TradingView

After declining for the past 6 months, GOOG appears to be consolidating within a bearish flag pattern (blue). A bear flag price pattern implies a break lower but is certainly not a guarantee. This week’s earnings release could be the catalyst for a break, one way or the other.

The Tale of the Tape: GOOG appears to be consolidating within a bear flag. A break below the pattern’s support area should lead to lower prices, thus a short position could be considered. 

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

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