Stock of the day: Google
31 October 2024
In today's stock of the day, let's focus on Alphabet (Google), as it faces a notable reaction to its latest earnings report. Earnings were published on Tuesday after the market close, and results were better than expected. The initial response was positive, with Alphabet opening with a bullish gap on Wednesday. However, the optimism didn’t hold, as the stock quickly reversed, ending the day with a significant bearish candle. While we didn’t quite close the gap, the strong downward movement is a signal that the market may be hesitating here.
From a technical standpoint, the setup on Alphabet has been mostly optimistic since mid-September, with a marked shift following a false bearish breakout below a key uptrend line, highlighted in blue. This false breakout below the orange uptrend line served as a springboard, propelling the stock higher. Adding to the bullish setup, we have a sizable inverse head and shoulders pattern marked by the black rectangle, with its neckline in green. Ahead of the earnings report, the price had managed to break above this green neckline, generally signaling strong positive momentum.
Despite the positive trend leading up to earnings, yesterday’s bearish candle with a long red body raises caution. It reflects broader market sentiment, which has turned somewhat negative, potentially casting a shadow on Alphabet’s bullish outlook. Still, as long as Alphabet holds above the green neckline and orange uptrend line, the long-term sentiment remains in favor of the bulls. A close below these two support levels would shift sentiment, turning this into a strong signal to go short.