For our equity and CFD friends out there, we’ve got an interest technical setup on Alphabet (GOOGL) in the works.
After a major pop higher on news yesterday, will the retest of a major resistance area draw in short-term sellers, or was the news strong enough to spark a break higher?
Major Resistance Area to Hold on GOOGL?
Alphabet (GOOGL) jumped big time in share price yesterday, thanks to not only another round of ridiculously good earnings numbers (41% revenue growth in 2021 vs. a +23% revenue jump in 2020), but also likely on the surprise announcement of a 20:1 stock split.
If approved by shareholders, the current plan is that on July 15, 2022, Alphabet will give each shareholder of the company’s Class A, Class B, and Class C stocks an additional 19 shares per share held on the record date of July 1, 2022.
This is a pretty big deal as this makes ownership in Alphabet more accessible to small investors, meaning it’s likely to draw in more capital and push the stock price higher after the split. Well, it looks like it’s already working as GOOGL jumped from $300 after the event from $2750 to $3000, but is it enough to push the stock higher from here?
Given that GOOGL is now trading around a major area of previous resistance and that the macro environment still looks pretty risk averse given the inflation and interest rate hike risks, odds are that many traders who got to ride the pop higher will likely take some profits from here in the short-term.
But in the longer-term, the impending likely stock split, and the expectation that Alphabet’s revenue growth trend will continue as it always has been, any kind of dips would likely draw in capital from longer-term investors, especially after the stock split.
That’s the scenario we’ll watching for a potential longer-term long position. If the market closes the gap over the next few weeks/months on profit taking and/or continue broad market weakness, a retest of the previous support areas from around $2800 down to $2600 is where we may consider putting on fresh longs.
This makes sense if the broader macro picture turns more in favor of risk taking (i.e., signs of transitory inflation conditions and/or less hawkish rhetoric from central banks on monetary policy tightening), so if the market still looks bearish by then, we’ll continue to stay on the sidelines.
