Alphabet rebounds strong with a bullish trend in the market
- The S&P 500 has recovered around 16% in less than a month after a significant market correction.
- Key technical indicators for GOOG suggest a budding bullish trend, with the MACD above the signal line and indicative EMA crossovers.
- A bull call spread option strategy is being deployed for GOOG, allowing traders to benefit from potential gains while managing risk.
In the United States, the S&P 500 recently experienced a significant recovery, regaining approximately 16% within a month as it emerged from a historical correction that had a substantial negative impact on the market. This recovery was notably led by several key stocks, referred to as the 'Magnificent Seven', among which Alphabet (GOOG) has shown remarkable momentum. Analysts have been keen to identify potential bullish trading opportunities in GOOG by analyzing various technical indicators such as the MACD and the exponential moving averages (EMAs). The MACD, an essential tool used for identifying trend reversals and assessing the strength of current trends, currently indicates an uptrend for GOOG as its MACD line is situated above the signal line. Moreover, trend followers often use EMAs to determine longer-term shifts in market trends, and an analysis of the 8, 21, and 34 EMAs indicates a recent crossover that suggests a potential bullish trend for GOOG. Historically, similar crossover patterns over the past nine months have preceded positive trend shifts, reinforcing the possibility that the stock may continue its upward trajectory. To capitalize on this momentum, a specific trading strategy has been proposed involving a bull call spread for GOOG. This strategy entails buying a $165 call option while simultaneously selling a $170 call option, with both transactions set to expire on June 6, 2025. As GOOG's stock currently trades around $166, this defined-risk trade allows for participation in the anticipated upside while keeping risk and reward neatly controlled. If GOOG’s price reaches or exceeds $170 by the expiration date, this setup could yield a return of 100% on the capital risked while maintaining a cost of $250 for the strategy. Traders and investors are encouraged to keep an eye on GOOG’s performance in the weeks ahead, as technical indicators suggest that the recent correction may be behind them and that a new bullish trend is forming. Nishant Pant, the founder of tradingextremes.com and the author of the book Mean Reversion Trading, advocates for this approach, indicating that this particular setup represents a compelling opportunity in the current market landscape as others start to recognize the potential for continued growth in Alphabet's stock price.