Alphabet Stock Surges, Showing More Strength Than Broader Market: What's Next?

Alphabet, Inc GOOG GOOGL was popping higher on Thursday, showing strength compared to the general market, which saw the S&P 500 sliding about 0.5%.

The spike higher confirmed Alphabet’s uptrend pattern — into which the stock reversed Jan. 6 — remains intact.

An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.

The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods.

Traders can use moving averages to help identify an uptrend, with rising lower time frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend.

Rising longer-term moving averages (such as the 200-day simple moving average) indicate a long-term uptrend.

A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.

In an uptrend, the "trend is your friend" until it’s not. In an uptrend, there are ways for both bullish and bearish traders to participate in the stock:

• Bullish traders who are already holding a position in a stock can feel confident the uptrend will continue unless the stock makes a lower low. Traders looking to take a position in a stock trading in an uptrend can usually find the safest entry on the higher low.
• Bearish traders can enter the trade on the higher high and exit on the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low, indicating a reversal into a downtrend may be in the cards.

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The Alphabet (GOOG) Chart: Alphabet’s most recent higher low within the uptrend was formed on Jan. 9 at $90.83 and the most recent higher low was printed at the $86.72 mark the day prior.

On Thursday, Alphabet was trading higher but not signaling the next higher high has occurred.,

• On Thursday, Alphabet was working to print a bullish engulfing candlestick on the daily chart, which may indicate higher prices will come again on Friday. Alphabet also regained the 50-day simple moving average Thursday, which may give bullish traders more confidence going forward.
• Eventually Alphabet will retrace lower to print its next higher low. That’s likely to happen soon because the stock has surged almost 9% without printing a higher low on the daily chart.
• Alphabet has resistance above at $94.82 and $97.79 and support below at $89.62 and $86.08.

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