Alphabet Is Up Some 15% This Month. What Does Its Chart Show?

Readers have likely noticed the early September breakout clocked by Google parent Alphabet GOOGL , which hit an all-time intraday high this week. Can the stock's nearly 15% run so far this month continue? Let's see what technical and fundamental analysis says.

Alphabet's Fundamental Analysis

GOOGL has risen 13.9% over September's first eight sessions to hit a $242.25 intraday record high on Thursday.

Most of Alphabet's September gains came on Sept. 3, when the stock popped 9.1% after a federal judge overseeing the U.S. government's antitrust case against Alphabet GOOG ruled that the firm doesn't have to sell off the Google search engine.

The court also said Google and Apple can retain a contract under which AAPL pre-loads Google's search engine onto iPhones in exchange for big payments from Alphabet.

GOOGL has risen another roughly 5% since then even though the company is still some six weeks out from its next earnings release.

Of the 45 sell-side analysts that I know of that cover the stock, 36 have revised their earnings estimates higher since the quarter began, while three have lowered their numbers. (The other six have so far left their earnings estimates unchanged.)

Alphabet's Technical Analysis

Now let's get down to business and take a look at GOOGL's technical breakout, as shown here in the stock's year-to-date chart through midday Tuesday:

Readers will see that from late January into August, GOOGL developed a bullish "cup-with-handle" pattern that looks like it came out of a textbook.

Marked with a purple curving line in the chart above, this pattern has a $206 pivot.

For those new to technical analysis, a cup pattern's pivot is the apex of the cup's left side. Once a handle is added, that pivot moves across to the right-side peak.

While I think that GOOGL could in theory move higher from here, I do have some concerns that are starting to nag at me.

For starters, the stock created a still-unfilled gap on the morning of Sept. 3, as denoted by the orange circle at the chart's right above. Such unfilled gaps don't have to be filled, but they often are.

That said, Alphabet's bullish technical set-up remains in place in the chart above. However, it does look like the stock's recent price surge was starting to top off in the high $230s and low $240s as I wrote this Thursday afternoon.

Meanwhile, GOOGL's Relative Strength Index (the gray line at the chart's top) is beyond merely extended. While that's a good problem for Alphabet bulls to have, it's the result of the stock's recent parabolic move and reflects a technically overbought condition.

Similarly, readers will see that Alphabet's daily Moving Average Convergence Divergence indicator (or "MACD," marked with black and gold lines and blue bars at the chart's bottom) is postured in a seemingly bullish way.

The histogram of the stock's 9-day EMA (the blue bars) is now significantly positive and has been for a number of days.

Alphabet's 12-day EMA (black line) is also well into positive territory and has crossed well above the 26-day EMA (gold line). That's also typically a bullish technical signal.

All in, GOOGL was trading at a roughly 20% premium to its 50-day Simple Moving Average (or "SMA," marked with a blue line above) and a whopping 31% premium to its 200-day SMA (the red line) as of Thursday afternoon. That's all somewhat concerning technically.

An Options Option

How might someone try to protect themselves if they're long the stock?

Consider purchasing a "protected collar."

First, buy puts that expire later than Alphabet's next expected earnings date -- say, a contract with an Oct. 24 expiration date.

The person would pay for those puts (or at least subsidize their purchase) by selling an equal-sized covered call against their long position.

Such a set-up would create a possible escape for an investor for a reduced cost through the sale of some potential excess gains.

(Moomoo Technologies Inc. Markets Commentator Stephen “Sarge” Guilfoyle was long GOOGL at the time of writing this column.)

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