The big high value US tech stocks are a key focus for index and stock traders at the moment. Uptrends have lost momentum. If this turns into a full blown correction it will be a negative for indices. Here’s one chart that suggests the big sell-off may not be about to happen
Alphabet Inc is the holding company for Google. Confusingly, there are 2 share listings following a share split. You can trade either Class A or Class C shares. These are essentially the same except for one key difference. “A” shares carry voting rights while “C” shares do not. For that reason “A” shares trade at a small premium to C shares but the rate at which they move is pretty much the same and there is little difference in the charts.
There are a lot of strings to Google’s bow but the key near term revenue drivers are likely to be mobile ad sales at Google and the YouTube platform. According to Bloomberg consensus data, analysts expect earnings per share growth of between 15 and 22% over each of the next 3 years. As a consequence of the recent sell-off, Alphabet’s valuation has slipped to around 21 times forward earnings which is close to the average of 20 times for the period since 1 January 2014. This is by no means over the top for a company with this growth profile.
Last night Alphabet showed signs of consolidating at a swing equivalent level where the AB swing = the CD swing as shown on the chart. This level also represents a 50% retracement of the rally off the trend line
This is a bullish chart pattern that would be confirmed if Alphabet starts to rally from here. Given current valuations, it’s not hard to imagine a recover getting under way from current levels
However, if the market does continue to move lower from, here the long term trend line or the 200 day moving average may also be supports for potential buyers to watch.