Since its 20-for-1 stock split on July 15, Alphabet (GOOGL) stock has become readily available to a whole new class of investor. However, GOOGL is nursing a 14% drawdown this quarter, as the Big Tech behemoth suffers amid a broader sector correction. The good news; this pullback has Alphabet stock encountering a historically bullish trendline on the charts. If past is precedent, it could present a high-flying stock at an intriguing entry point.
The shares are within one standard deviation of their 200-day moving average, per Schaeffer’s Senior Quantitative Analyst Rocky White. For the purpose of this study, White defines that as the equity trading above the moving average for 80% of the time over the past two months, and closing north of the trendline in eight of the last 10 sessions. Alphabet stock has run into its 200-day trendline twice in the last three years. After each pullback, the security was higher one of month later both times, averaging a 9.1% return.
From its current perch at $156.45, a move of similar magnitude would put GOOGL back above $170 for the first time since late July. There’s additional chart support at the shares’ +10% year-to-date level, as well as $155, which was former resistance back in April but stepped up as support in early August.
With a market cap of $1.9 trillion, there isn’t a lot of contrarian potential surrounding GOOGL. However, the stock’s 14-day Relative Strength Index (RSI) does sit all the way down at 30, on the cusp of “oversold” territory, which indicates a short-term bounce may be in the cards.
