After great earnings and a 12% dip, the chart says Alphabet stock is a FAANG holding to buy.
The FAANG group has been hit and miss so far this year. Three of the components are outperforming the Nasdaq’s 11.1% year-to-date loss, while two are badly underperforming.
The latter two — Meta (MVRS) – Get Meta Report and Netflix (NFLX) – Get Netflix, Inc. Report — are down more than 30% so far this year.
Interestingly, none of the FAANG components are higher on the year. The best performer so far in 2022 is Apple (AAPL) – Get Apple Inc. Report, down 4.75%, followed by Amazon (AMZN) – Get Amazon.com, Inc. Report.
Yet none of these names are the buy-the-dip stocks I’m referring to. Instead, I’m talking about Alphabet (GOOGL) – Get Alphabet Inc. Class A Report (GOOG) – Get Alphabet Inc. Class C Report.
Alphabet is the best-performing FAANG stock over the past 12 months and that’s even after it traded sideways for the last four months of 2021.
Further, it’s fresh off a better-than-expected and, quite frankly, a robust quarterly report. In that report, the company also declared a 20-for-1 stock split.
The news was enough to send Alphabet stock to new all-time highs.
After eclipsing the prior high at around $3,019, the stock topped out at about $3,031 and moved lower over the past few weeks.
I think it’s a dip worth buying.
Buying the Dip in Alphabet Stock
Daily chart of Alphabet stock.
Chart courtesy of TrendSpider.com
I was a bit conflicted here because to some extent as goes the Nasdaq, so goes Alphabet.
While it’s possible that Alphabet can outperform the Nasdaq — just as it has over the past one-, three-, six- and 12-month periods — that doesn’t mean increased selling pressure in the index won’t hurt the stock.
That said, we already have earnings off the table as a risk (and instead have it as a reward in our back pocket).
We know that when — not if — buyers come back to the market, they will go to the high-quality companies doing well, and Alphabet is one of those companies. We just don’t know where the bottom is.
At today’s low, Alphabet stock was down about 12% from the post-earnings high. Admittedly, it’s struggling to hold the 200-day moving average and is below a number of key short-term moving averages.
But it’s trying to find its footing. Should the selling in the overall market accelerate, Alphabet stock could be looking at a test of the 50-week moving average and the fourth-quarter low.
I don’t know that Alphabet will make new lows. If it does, I wouldn’t be surprised in this climate. But bulls should be on the lookout for high-quality companies that have strong earnings and solid underlying businesses.
Alphabet has all those attributes and now the bulls can buy it after a great quarter at a price lower than it was before the print — and at a 12% discount from the highs.
