Alphabet (GOOG) currently finds itself at a crossroad after reporting earnings last night. Like some of its mega cap peers, Alphabet showed increasing relative strength in the SIA S&P 100 Index Report during 2021 and decreasing relative strength in 2022. GOOG dropped out of the green zone in April, then tumbled down into the red zone in June.
Recently, GOOG bounced up into the Yellow Neutral Zone but has started to weaken again in the last couple of days. Yesterday, it finished in 42nd place, down 2 positions on the day.
Since completing a bearish Rising Wedge pattern at its peak in late 2021, Alphabet (GOOG) has been under distribution with a new downtrend of lower highs emerging, then steepening. Lately, the shares have been tumbling within a $105-$120 trading range, a sign of increasing distribution.
Alphabet has already broken below $105 this week, a troubling sign. A close below the $100 round number would confirm the start of a new downleg with next potential support near $92.50 then $85.00 on trend. Should the shares rebound, initial resistance may appear at the 50-day average near $112.50, then the channel top near $120, and then $126 ad $135.
A major uptrend in Alphabet (GOOG) shares, within which the 2020 bear market was only a speed bump, peaked in November of last year. Over the winter, lower highs suggested that GOOG was coming under distribution, but that became clearer when the shares plunged in May.
For the last two months, GOOG has been trading between $104.00 and $121.50, but is has been unclear if this is a base forming or a pause within a larger downtrend. So far this month, the shares have been under pressure, completing bearish Double Bottom and Spread Double Bottom breakdowns, but so far channel bottom support has held.
A close below $103.80 would signal the start of a new downleg with next potential support in the $88.60 to $85.15 zone where a previous column high converges with horizontal counts. On the other hand, a bounce above initial resistance near $114.60 would complete a 3-box reversal and signal the start of a new upswing with initial resistance possible near $121.65, then $134.30.
With its bearish SMAX score falling to 3, GOOG is exhibiting weakness against the asset classes.
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