It’s been a tough year for technology investors.
The statement reflects the performance of most tech stocks big and small – Alphabet (GOOGL) – Get a free report (GOOG) – Get a free report included.
Alphabet, one of the mega-cap tech stocks and member of the announced FAANG group, is struggling to weather the 2022 bear market.
Google’s parent company’s move wasn’t the worst of growth stocks; some have seen drops of 60% to 70% or more. But Alphabet’s shares have suffered their worst fall in 12 years.
So far, the stock has experienced a 45% peak-to-trough decline.
For a company with solid growth, reasonable valuation, robust balance sheet, and valuable assets like Google.com and YouTube.com, this kind of decline doesn’t happen very often.
It’s a similar story for Microsoft (MSFT) – Get a free reportand when it happens, the bulls would have to take a closer look to decide if they should build a position.
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Alphabet’s business is slightly more sensitive to the global economy than Microsoft. As companies come under pressure, they are slashing marketing budgets, including spending on digital advertising.
Looking at the weekly chart above, notice how the monthly VWAP reading moved from support to resistance. The same observation can be said for the $100 to $105 area.
Alphabet shares are now filling the gap at $89.44 as investors worry about whether the stock will retest its 52-week low of $83.34.
Now that the gap has been filled and Alphabet’s shares are nearing the $90 breakout level, the bulls are hoping the stock will find support.
At the same time, the stock is below all of its daily and weekly moving averages and is prone to more losses. This is especially the case with aggressive interest rates from the Federal Reserve and continued selling pressure in the broader market.
Keep it simple from a trading mindset.
If Alphabet’s stock dips below $86.50, the lows could be back in play. Under $83 and it opens the door to the $72 to $76.50 area. That area marks the 78.6% retracement and pre-covid highs.
On the bright side, keep an eye on $90. Above $90, the 10-week and 200-week moving averages come back into play near $95, followed by the main $100 to $105 area.
If Alphabet stock can clear that zone, it could finally emerge from this downtrend — at least in the interim term.
Investors are likely to have a less technical approach to the stock. My thinking is that Alphabet is a great long-term company that has short-term headwinds.
If it’s down 40% to 50%, it’s better to think of it as a long-term buy rather than a long-term sell. That doesn’t have to mean all-in, but it can be piled up in parts until technique improves.