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The Street
The Street
Business
Bret Kenwell

Alphabet Has Helped Drive the Nasdaq; Here's Where to Buy the Dip

Alphabet (GOOGL) (GOOG) has been among the cohort of megacap tech stocks that have helped drive the Nasdaq.

The index sports a year-to-date gain of almost 30%, while the S&P 500 is up more than 13%. Both are seeing a pullback at the moment; trying to avoid a fifth daily decline in the past six days.

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For Alphabet’s part, it’s been viewed as a laggard in the AI race, which has helped propel Nvidia (NVDA), Microsoft (MSFT) and other stocks higher so far in 2023.

A few weeks ago we looked at the prospect of Alphabet stock engaging in a catchup trade to its FAANG peers.

Netflix (NFLX) enjoyed this catalyst earlier this year, and even though Alphabet has performed well in 2023 — up 37% — it’s still the worst-performing FAANG component.

That said, the stock has still traded quite well, and a look at the chart shows a clear trend to the upside.

When to Buy the Dip in Alphabet Stock

Daily chart of Alphabet stock.

Chart courtesy of TrendSpider.com

When Alphabet shares made the push to the June high at $129.04, keen observers noted that it did so with a negative divergence in the RSI measure. While that doesn’t predict a pullback, it had experienced traders on the lookout for such a reaction.

Last week, Alphabet stock almost tagged the rising 10-week moving average, but bounced just before actually testing it. With that price action, it will be interesting to see whether the stock will test the 10-week and/or the 50-day moving average.

Given the trend, one would expect these measures to hold as support. But I am looking for a bit deeper of a correction.

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If that’s the case, a pullback to the $113 area looks attractive. That’s where the gap-fill measure and the 61.8% retracement of the recent rally comes into play.

If we get a yet deeper fade in Alphabet stock, that could thrust the $108 area into play.

At that level, we have the first-quarter high, the recent breakout area and the 78.6% retracement.

A retest of a prior breakout zone is often on watch by traders, as it’s a level where buyer interest was intense. If it lines up with other key measures — like a notable retracement or prior high — then all the better.

For now, let’s see how Alphabet handles the 10-week and 50-day moving averages. If we get further weakness below these measures, then these buy-the-dip areas will be in focus. 

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