On the basis of a report issued by Goldman Sachs on tech stocks, and a rating downgrade by Canaccord Genuity, on June 20th, we had issued a report forecasting a downtrend in the stock of Alphabet (NASDAQ: GOOG), which owns the search engine Google, and informed our interest to purchase a put option valid for a week. Our strike price for the trade was $960. A week later, the stock dropped by about 3% to trade at $927. It is needless to say that the option had expired in the money. Now, we expect a bullish reversal in the share price on the basis of the following details.
According to a research conducted by 360i, Google’s Home – the artificial intelligence system of Alphabet – was able to provide more accurate answers and responds to a wider variety of commands in comparison to Amazon’s Alexa. The proprietary software of 360i asked nearly 3,000 questions to both devices to arrive at the conclusion. The research also showed that Google’s search abilities remain unmatched. To put it precisely, according to 360i, the probability of getting a reply from Google Home is six times higher than Amazon’s Alexa. According to a survey conducted by RBC Capital Markets, Alexa, with nearly 70% of voice based artificial intelligence market, will generate a revenue of $10 billion by 2020,. Thus, considering the better performance of Google, one can expect the market share and revenue of Google to increase in the future.
In another development Alphabet’s subsidiary Waymo, the autonomous driving unit, signed an agreement with Avis Budget Group, which offers car on rent. Under the deal, Waymo would offer self-driving cars to Avis Budget Group, while the latter would offer parking space and take care of servicing and maintenance. Most of the 600 vehicles would be deployed in Phoenix, Arizona. Analysts consider the deal as a major victory for Google’s Waymo unit. The deal strengthens some investors claim that the value of Waymo could be in the tens of billions of dollars. Thus, considering the growth prospects of Google Home and Waymo, we expect the stock to remain range bound with bullish bias.
The historic price chart indicates support for the stock at 920. The RSI oscillator also indicates an oversold scenario. Thus, we can expect an appreciation in the share price of Alphabet. On the upside, next major resistance is at 965.
To gain from the impending uptrend, we wish to purchase a high or above option from a dependable binary broker. A strike price close to $930 is preferred. Additionally, we would choose a date around July 8th for the option’s expiry.
Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.
