Alphabet shares busted out of their consolidation pattern since July and reached the $720/share levels after gapping higher. Profit-taking could ensue and fill the gap this week, along with some event risks.
In particular, the FOMC is gearing up to make its monetary policy statement mid-week and its bias might have a strong impact on US equities, including Alphabet shares. The Fed is still expected to tighten monetary policy before the end of the year and any emphasis on these plans could lead investors to pare their stock holdings in anticipation of higher borrowing costs.
Still, the 100 SMA is moving farther away from the longer-term 200 SMA on the daily chart of Alphabet shares, indicating an increase in bullish momentum. If this keeps up, price could eventually move up to the next psychological resistance at $750/share.
Alphabet Shares Outlook
On the other hand, a decline in buying pressure could allow the stock to correct until the previous close at $650/share. Stochastic is on the move down, suggesting that sellers are taking control of price action. However, RSI is still heading north, which suggests that buyers aren’t ready to give in so easily.
Most of the equity gains in the US market have been driven by positive earnings reports towards the end of last week, as Facebook stocks have also jumped up to record highs. Aside from that, the Chinese central bank’s decision to cut interest rates in order to stimulate growth also brought risk appetite back to the financial markets, as this eases fears of a worse global slowdown.
Cautious remarks from the FOMC this week could allow the stock rallies to carry on, as the promise of extended lower rates could spell positive prospects for US companies. Data from the US has been a bit disappointing recently, potentially leading some Fed officials to step back from their hawkish bias.
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