GOOGL: Buy the (rare) breakout above 1,000!

6 giu 2017

GOOGL yesterday broke out of its resistance at $1,000/share and closed above it. This is a noticeable and rare feat. The quality of the fundamentals/growth and the strength of the momentum on this stock are such that there should be few remaining short sellers (1.2% of free float) at the current stratospheric heights. While many would argue that “the valuation is stretched by any measure” which is undeniable, I would argue that this should not keep this asset from going higher. Anticipate the run to continue from here, for technical reasons at least.

IN CONCLUSION
Target +5% upside in the visible term
Buy the breakout at the market in half position
Staggered stop-losses at 980 (-2.3%) and 960 (-4.3%)
Blended reward-to-risk = 1.5x on the basis of a 5% target, more if the current run continues

6 giu 2017

Nota

Alternatively, buy a medium term (Sept/Oct) ATM or slight OTM call for a fraction of the cost (10-15% annualized yield). This would especially make sense in the context of the low historical volatility of Alphabet. 5-day volatility currently in the 13% region.

12 giu 2017

Nota

GOOGL was one of leaders of the Friday selloff, as it corrected 3.4% in twice average volume. We are yet unsure where this correction will take us, but we know for sure that the breakout above 1,000 has failed so far. Please stick to stop-losses highlighted above.

13 giu 2017

Nota

Heavy selloff on Friday followed by bullish hammer formation yesterday in even greater volume… Talk about indecision ahead of the Fed meeting! Friday took us down while yesterday’s session gave us a bullish reversal pattern which typically marks trend reversals or main support levels, all this with a closing price just above the 960 support we had highlighted previously. What now? We need further confirmation that the selloff is over. In the meantime, keep assuming market indecision and respond to it with tight stop losses. Those who have not been stopped out of this trade could lower their stop loss level to 935, just below yesterday’s low. Those who were stopped should await further directional confirmation to get back into this name.