Google Breakup? The Risks and Rewards of Holding Alphabet Stock

According to media reports, the U.S. Justice Department is considering a push to break up Alphabet GOOGL. 

I have no special insights on this topic but I want to check out the charts and indicators to see how traders may respond to this potential development.

In the daily bar chart of GOOGL, below, I can see that the shares have been correcting lower the past six weeks. GOOGL is trading below the declining 50-day moving average line so math tells me that the short-term trend is down. Prices have approached the cresting 200-day moving average line. 

Trading volume has increased in recent weeks, telling me that traders are voting with their feet and selling. The On-Balance-Volume (OBV) line turned lower at the beginning of July and suggests that sellers of GOOGL have been more aggressive than buyers. The trend-following Moving Average Convergence Divergence (MACD) oscillator is in a bearish alignment below the zero line but trying to generate a cover shorts buy signal.

In the weekly Japanese candlestick chart of GOOGL, below, I can see a longer-term rally with prices trading above the rising 40-week moving average line. The line was tested last week when a candlestick pattern dipped down to the average line. 

The weekly OBV line has been pointed lower since the beginning of July. The MACD oscillator has crossed to the downside for a take profit sell signal.

In this daily Point and Figure chart of GOOGL, below, I can see a potential downside price target in the $141 area.

In this second Point and Figure chart of GOOGL, below, I used weekly price data with a five-box reversal filter. This suggests a price target in the $76 area. Ouch.

Bottom-line strategy: GOOGL has corrected in the past six weeks but I don't get the feeling that the selloff is over. I would take a cautious approach with any purchases of GOOGL.

Employees of TheStreet are prohibited from trading individual securities.