Are you seeing this move in Alphabet (GOOGL)? Tomorrow could be a big day! (October 11, 2017)
GOOGL
I want to look at Google ( NASDAQ:GOOGL ) here for a couple of different reasons. First because of the stock, but also because of the pattern that occurred today and lessons that you can glean from that.
Let’s look at squeezes in different time frames. The first thing is, you have got this squeeze here that occurred over several weeks in the stock. This is the all-time high, right here, so it is right back up here. The stock had been consolidating for a few months, right? Then it got in a really tight range. And then late in September, just a couple weeks ago, a little more than that, the stock broke out above 960.00. It has only gone up $40.00; and for a stock that started at 960.00, $40.00 just isn’t that big of a deal, maybe not even 5 percent, so it hasn’t been a big move.
But, if you are trading options on this, buying call options or for that matter selling puts or doing some kind of option trades, a $40.00 move in a stock is a pretty big deal so you can make some good money on that. Options are a little thin, a little illiquid, some of the ones that are at the money front month can be a little more active. But typically you stand a pretty big risk of losing money if you are wrong on the direction of the trade. The problem is, if you are buying an option with a very, very wide bid-ask spread, if you are buying it on the offer, on the ask, and then you go, “Oh crap! I am wrong about that!” And you have to sell it right away, particularly if the stock is moving against you, now you have got to be selling at the bid. So you are crossing the spread twice. And if it is a wide spread, that is a pretty big crossing. We will leave it at that. Just be careful on that kind of stuff.
This is a good trade here. When you look at this intraday what happened was, this is how it was looking this morning, towards the end of the day yesterday, nothing. But we did have a squeeze. Actually, starting back here around 1 or 2:00. yesterday the stock was trading in a pretty tight range. And then first thing this morning the stock comes out of this range. That is why it kind of pays if you are going to look at an intraday chart, don’t forget about yesterday. Don’t forget about the day before. They matter. You get the breakout here first thing in the morning and it doesn’t pull back.
This line here is the volume weighted average price. It is a common indicator that day traders use. Anybody who is buying or selling stock in size, they want to know where they are buying the stock relative to where it has traded the most. If it is too high above the average price based on volume, well they don’t want to buy it there because they are buying it too high. Everybody else has been getting it at a lower price and I am buying it up here. Well, that kind of stinks, so they are not going to do that. On the other hand, if the stock happens to fall back to the VWAP (volume weighted average price), if it falls back to the VWAP that is like a money manager buying a stock at the 50-day moving average. You say, “Okay, well now I am getting it at the average price, that is good. I know I am not overpaying for it relative to the way the stock is trading.”
So here, we get a breakout above this VWAP. Never came back to test the VWAP, I guess you could say this a little bit, but that is not what I am talking about. I am talking about momentum and a breakout from a squeeze staying above the VWAP, you are staying long. And then even during this two-hour consolidation period, if you are an active trader, you are long this stock, you are long some options, set a price alert. Set one here at this level, 1002.00. Set one down here at 998.00, 999.00, and then you can forget about it as long as your alerts aren’t hit, you know, the squeeze continues. Your upper alert gets hit, you say, “I think I am going to buy some call options.” Buy the $1000.00 call options, don’t go out too far, try October’s even. And then the stock moves up another few dollars, $3.00 maybe $4.00 or so and you have got another second trade going here.
What I am saying is, that you can take advantage of these squeezes intraday as well as on the daily chart. Now, with respect to tomorrow, if we get an upside move in the market, tomorrow, particularly if technology continues to trade higher, this could be a really solid breakout. You would have to look at $1000.00 instead of resistance like it was on Monday, now you have got to look at it as support, 1995.00. The stock, if it does pull back tomorrow, shouldn’t fall below this level here. As long as it stays above this level, frankly, you have got to look for more upside on this. It could happen. Wait for the stock to tell you that it is moving higher. And it will tell you that it is moving higher if it does not fall below this level and if it does run above this level. So this area here is kind of no man’s land.
Free Chart