Alphabet stock just underwent a 20-for-1 stock split. Here’s how to trade the stock after the event.
Alphabet (GOOGL) – Get Alphabet Inc. Report (GOOG) – Get Alphabet Inc. Report stock had a nice pop last week but has been struggling over the past few days. In fact, the shares are now down in four of the past five sessions and are flat on July 18.
That’s as the company’s 20-for-1 stock split went into effect today.
While a stock split does not change the value of the business, statistics highlight how it can act as a catalyst for the stock price over the next 12 months.
So far this year, we’ve seen strong presplit performances but poor performances afterward. That goes for Amazon as well as Shopify (SHOP) – Get Shopify Inc. Class A Subordinate Report. It’s classic “buy the rumor, sell the news” price action.
Will we see more of the same now that Alphabet has undergone its split?
Alphabet stock found support at $125 throughout the first quarter. The shares even briefly hit all-time highs in February at $151.55 after the Mountain View, Calif., company reported strong earnings and declared the 20-for-1 stock split.
Once $125 failed as support, the shares didn’t bottom until they hit $101.88 in May. That came just above the 50% retracement from the all-time high down to the 2020 low, at $100.
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Since then, Alphabet stock has been riding uptrend support higher (blue line) but has struggled with resistance between $118 and $120.
It’s not uncommon for a stock to rally ahead of an event, but this resistance level was strong enough to stop Alphabet’s presplit bullish momentum and cause the shares to turn lower.
From here, the bulls need to keep an eye on this month’s low and last month’s low between $105.73 and $105.05, respectively. A break of this zone could trigger a monthly-down rotation, putting the 2022 low in play near $102.
Below that opens the door to the obvious: $100 and the 50% retracement.
If Alphabet stock really accelerates to the downside — likely alongside a broader market decline — then it could put the $89 to $90 zone in play. There we find the 61.8% retracement and the 200-week moving average.
For long-term investors, this decline would likely be a great long-term opportunity with the shares down about 40% from the highs.
Keep in mind: Along with Apple (AAPL) – Get Apple Inc. Report and Microsoft (MSFT) – Get Microsoft Corporation Report, Alphabet has been one of the strongest names so far this year in tech. So if the bulls can push it higher, it may piece together a formidable rally.
Currently though, the shares are stuck below a bevy of key measures, including the 10-day, 10-week, 21-day and 50-day moving averages, as well as the daily VWAP measure.
If Alphabet stock can clear this area, it opens the door up to the $118 to $120 resistance zone, then $125. A move above $125 can send Alphabet to its 200-day moving average.