Alphabet stock analysis: the dip may be a good long-term buying opportunity

The Alphabet share price analysis shows the stock may drop below $2,000, presenting a good long-term buying opportunity for traders.

Alphabet (NASDAQ: GOOGL) declared stellar Q1 2021 results, surpassing analyst estimates. Even though Google is huge with about $1.5trn (£1.06trn) in market capitalisation, it has continued to record strong growth. The search giant reported a 34% increase in revenues from $33.76bn in Q1 2020 to $44.68bn in the latest quarter. YouTube recorded a 49% growth rate, generating ad revenue of $6.01bn.

Google Cloud revenues had surged by 46% over the same period a year before r but it made a loss of $974m during Q1 2021. The company’s “Other Bets” segment also reported a loss of $1.15bn. However, both these segments are likely to turn profitable in the next few years.

As economies reopen around the globe, businesses are likely to increase their allocation to advertising, which may boost Google’s revenues further. The expected growth rate for the current year is about 49% and the average analyst price target is $2,662.50, according to Yahoo finance.

With strong earnings visibility for the next few quarters, will the Alphabet stock go up? Here’s our GOOGL stock analysis.

Alphabet Share Price Technical Analysis - Weekly Chart

The Alphabet share price has been in a strong uptrend for the past few months. The stock rallied from its March 2020 low of $1,008.02 to an all-time high of $2,428.89 by the end of April, a 140% rally in just over a year.

The sharp rally of the past few weeks pushed the relative strength index (RSI) above 75. Historically, the stock has witnessed a minor correction or consolidation when the RSI jumps near the 80 level. 

Although bull traders purchased the dip last week, they could not sustain the recovery. Continued selling this week has dragged the price lower.

During strong uptrends, traders buy the dips. In this case, the first support will be the breakout level of $2,142.96 and then the 20-week exponential moving average (EMA), which is at $2,086. This zone is likely to find strong buying support. However, a break below this zone will indicate the start of a deeper correction to the 50-week simple moving average (SMA). 

The Alphabet stock price analysis of the weekly chart shows the start of a possible correction. 

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Alphabet Share Price Technical Analysis - Daily Chart

After holding above the 20-day EMA for a few days, the stock slipped below it on 10 May and has corrected to the 50-day SMA. Bull traders are likely to defend the support aggressively.

However, the 20-day EMA has started to turn down and the RSI has dipped into negative territory, suggesting the bears have the upper hand. 

If the price breaks below the 50-day SMA, selling may intensify. That could pull the price down to $2,000 and then $1,700. 

But the price could rebound off the 50-day SMA and climb above the downtrend line. That could result in a retest of $2,428.89. A breakout of this resistance could start the next leg of the uptrend that may reach $2,682.09.

Alphabet stock buy or sell at these levels

The Alphabet share price analysis shows the stock has started a correction and a break below the 50-day SMA could result in further downside. Buying a stock during a downtrend could result in losses.

Positional traders may need to wait for a correction to end before buying. The decline is likely to end between $2,000 and $1,700. Therefore, traders should watch these levels carefully and consider buying in phases if the stock shows signs of bottoming out.

Trade Alphabet stock - Alphabet shares price

Alphabet Inc
Daily change
92.6
Low: 92.6
High: 94.3

FURTHER READING: Advanced Micro Devices stock analysis: a key reversal pattern signals weakness

FURTHER READING: NVIDIA stock analysis: watch out, a bull trap may be forming

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