GOOGL at 2-Year Low: The “Ghost” Is Clear for Another Big Opportunity
A bullish 20-1 stock split in July and… GOOGL plunges to a 2-year low? Elliott waves reveal the reason why the tech titan tanked, and where it could be headed next.
by Nico Isaac
Updated: November 10, 2022
If you're like me and a few million other people, this Halloween gave rise to a new addiction; not to candy, but to online gaming. Well, to one online game.
After logging on to search, "When is too early to start drinking Eggnog?" I was met with the Google Doodle's "Great Ghoul Duel," a multi-player interactive video game in which participants around the world join up in randomly selected teams of four.
Their mission: use the up down arrows to move their neon-colored Caspar avatars around haunted corn mazes, collecting as many spirit flames as possible in two minutes time and carrying them back to homebase without getting intercepted by enemy spirits. The winning team has the most flames by the time the moon is gone.
At some point as the real moon outside began to give way to sunrise, I realized I had a problem and slammed my laptop shut!
The next day, head filled with floating pixelated green and purple ghouls, it dawned on me where I had seen this kind of compulsive group behavior before -- the stock market!
Every day, millions of investors and traders across the globe come together to stay on the right side of price trends for as long as possible. Now, this is where mainstream financial wisdom says those market "avatars" are controlled by a wide swath of outside forces, known as "fundamentals."
But we stand behind a different methodology, known as the Elliott Wave Principle. If you're new to it, here's a summary of its basic tenets:
- Market trends are driven by collective, group psychology
- This group psychology forms repeating patterns in price charts
- Because these price patterns repeat, they are also predictable
- Once you know which of the 13 known Elliott wave patterns your market is in, you can make a probability-based forecasts as to what's next
So, which model is right?
Well, we can use the recent performance in Alphabet Inc. to find out.
Back in July, GOOGL had endured six months of decline from its November 2021 peak. Prices stood at a one-year low amidst a broader tech-sector meltdown. But according to the mainstream experts, the ultimate game changer was about to reset GOOGL's course and send the stock higher.
On July 18, GOOGL was undergoing a personally unheard of 20-1 stock split. For reference, the last stock split for GOOGL was in 2014, at a 2:1 ratio. Stock splits are often perceived to be bullish, as they make previously unattainable stocks affordable for the average investor.
(In that way, they're meant to be like the TKTS discount ticket booth in Times Square, where you can get decent seats for Broadway musicals at a fraction of the cost. If you've ever had to stand in one of those lines on opening day, you know to bring lots of snacks!)
As these headlines from the time show, GOOGL's stock split was widely expected to be met with such a price-boosting line:
- "Buy Google Before the Breakout" -- July 11 Seeking Alpha
- "Alphabet Stock is a Buy After Split" -- July 27 Morningstar
- "Google: The Bottom is in" -- July 30 Seeking Alpha
Wrote CNN Business on July 18,
"The split has two potential benefits. First, it may make Alphabet shares more enticing for everyday investors. Second, it increases the odds that Alphabet could eventually be added to the prestigious Dow Jones Industrial Average."
But on July 12, our Trader's Classroom editor Jeffrey Kennedy set GOOGL under the Elliott wave lens, and there, he saw a very different -- i.e., bearish -- outlook. Jeffrey presented the following chart of GOOGL, on which he identified a mature fourth-wave, corrective rally. The path forward was clear:
"We're working a fourth wave price move. As far as the wave structure goes, it looks like we will continue to push up a little bit higher and then reverse. We have some nice Fibonacci resistance, and also structural resistance coming into play right around that 2450 area. So, this would be a nice area to see prices move to and then reverse from.
"This argues that we're about to get hit pretty hard as we move into August and September."
Pre-stock split, Jeffrey identified 2450 as a "nice area to see prices reverse from." After the stock split on July 18, that level became 122.50.
And, this next chart shows what followed: GOOGL continued higher until peaking at $122.18 on August 15. From there, prices plunged to a 2-year low on November 3.
As for where GOOGL? is headed now...
On November 3, Trader's Classroom revisited the tech giant to pick up where its last lesson left off. After assessing a few options, Jeffrey reveals why he's "going with" one particular wave count as his "operative interpretation."
Trading carries risk. And Elliott wave analysis doesn't remove that risk entirely. It does, however, present an unemotional assessment of where prices may go based on objective price patterns. And it gives you critical price levels to help manage the inherent risk.
Start watching Trader's Classroom's educational lessons today, and learn how to anticipate where the markets you follow could be tomorrow.
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