Alphabet’s stock is ready for a breakout, this investor says

It’s too early to tell when another big breakout will occur, but judging by the stock’s past history, it’ll come at some point, says Keith Richards, portfolio manager and technical analyst for ValueTrend Wealth.

Google parent company Alphabet is making the news on Wednesday as the European Union hands down more antitrust fines to the company over its advertising practices. The 1.49 billion Euro fine is the third such penalty from the EU, together totaling almost $10 billion Euros.

“We’ve already made a wide range of changes to our products to address the commission’s concerns. Over the next few months, we’ll be making further updates to give more visibility to rivals in Europe,” said Kent Walker, Google’s senior vice president of global affairs, in a statement.

And while some investors fear further regulatory impediments for the big tech companies like Google and Facebook, the FAANG stocks as a group have fared well so far in 2019 after a disastrous Q4 of 2018. Alphabet is currently up almost 16 per cent year-to-date.

Looking at a longer timeline, Richards says the prospects of bigger gains for the stock are looking good.

“In 2017, a lot of the FAANG stocks just kind of went bananas and they really did get quite overbought,” Richards told BNN Bloomberg Tuesday. “[For Alphabet], 2017 was perfectly smooth, there were hardly any bumps [on the chart], and all of a sudden, 2018 comes along and we’re getting some bumps.”

“If you look at a longer history for Google, you’ll see that it actually does this. It goes through these consolidation periods and then it goes up. It’s one of the more predictable stock patterns. It goes sideways and then up, sideways and then up. So the next move will be up. It’s going to break out but we don’t know when,” he says.

For about two and a half years between early 2010 and mid 2012, Google’s share price stayed relatively flat before effectively doubling between mid-2012 and early 2014. Then came another flat stretch before the stock once again took off in mid-2015.

That kind of repeated pattern makes GOOGL a long-term hold candidate, Richards says.

“It’s actually a great long-term stock. This is the one company that I don’t mind being a buy-and-hold investor with. It could stay sideways for another year or it might break out tomorrow, but either way, it’s a great long-term chart,” he says.