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Writer's pictureRealFacts Editorial Team

Navigating the Ups and Downs: Trend-Following Strategy for Alphabet Inc. (GOOGL)


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As a long-term trend follower, my strategy focuses on finding stocks that show consistent growth and riding their uptrends for as long as they last. This method also involves identifying short-term drops within a long-term uptrend, as these dips can be perfect opportunities to buy into strong-performing stocks again. Alphabet Inc. (GOOGL) is a good example of this approach. The stock is nearing a key "support level," where different technical indicators line up, suggesting a potential buying chance during its current uptrend. This setup also provides a clear point to exit if the short-term drop continues.


Alphabet has been navigating a main uptrend since late 2023, though it has seen significant declines of over 10% at times. The recent dip of about 19% has been tough for investors, but such corrections have been fairly typical over the past 18 months. For example, a similar dip happened in March, when GOOGL fell around 15% before bouncing back to its 200-day moving average. A buy signal from the Percentage Price Oscillator (PPO) confirmed the end of this short-term downtrend, a pattern also seen in November after a low in October. In both cases, a rebound above the 50-day moving average signaled a return to the uptrend.


Right now, GOOGL is testing its 200-day moving average again, with the PPO indicator approaching a buy signal. The best scenario would be for GOOGL to find support at its current level, receive a buy signal from the PPO, and then move above the 50-day moving average to complete the trend reversal. To confirm support levels, it’s useful to look at Fibonacci retracement levels from the 2023-2024 uptrend. These retracements suggest potential downside targets around $150 and $168, with a crucial level near $154 aligning with the 200-day moving average and recent lows. If GOOGL falls below $150, it would mean the 200-day moving average didn’t hold, possibly requiring a reassessment of the stock’s long-term trend. Using trend-following tools alongside Fibonacci analysis can help predict potential trend changes and set clear exit points if short-term drops turn into longer-term downtrends.


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