Case Study: Alphabet Inc. (GOOGL)

Trade Setup

In late 2020, I noticed that GOOGL was forming a bullish inverse head and shoulders pattern on its daily chart. The stock had been consolidating for several weeks, and I believed it was poised for a breakout.

Entry

On October 29, 2020, GOOGL broke out above the resistance level of $1,730.00, which was the upper trend line of the inverse head and shoulders pattern. I entered a long position at $1,740.00, with a stop-loss at $1,680.00, just below the previous support level.

Trade Management

As the trade progressed, I adjusted my stop-loss to lock in profits. On November 5, 2020, GOOGL reached a new high of $1,850.00, and I raised my stop-loss to $1,800.00. This ensured that I would at least break even if the stock pulled back.

Exit

On November 12, 2020, GOOGL announced its Q3 2020 earnings, which beat analyst estimates by a wide margin. The stock price surged to a new all-time high of $1,934.83. I decided to take profits and closed my long position at $1,900.00.

Results

This trade resulted in a profit of $160.00 per share, or a 9.2% return on investment (ROI). The trade duration was approximately 14 days, which is relatively short-term.

Key Takeaways

Technical analysis: The inverse head and shoulders pattern provided a clear indication of a potential breakout.
Risk management: Setting a stop-loss and adjusting it as the trade progressed helped minimize potential losses.