Alphabet Inc. (GOOG, GOOGL) reports first quarter earnings  after the bell on Monday, April 23, with Wall Street analysts expecting earnings per share of $9.29 on $30.3 billion in revenues. The internet giant missed fourth quarter earnings estimates by 37 cents in early February but exceeded on revenues by a small margin, triggering a 62-point one-day slide, trapping bulls who bought a breakout to an all-time high earlier that week.

The stock has underperformed badly since that time, grinding out volatile bilateral swings that hit a five-month low at $964 on March 28. It is now trading near the dead center of the four-month range, signaling a nearly perfect balance between bulls and bears. Even so, a downturn here could mark an ominous event, with the next decline below $1,000 completing a bearish head and shoulders topping pattern. (See also: The Business of Google.)

GOOGL Long-Term Chart (2004 – 2018)

An August 2004 IPO opened at a split-adjusted $50.01, generating range-bound action into a September breakout that attracted strong buying interest into November, when the stock topped out near $100. It cleared that barrier a few months later and embarked on a healthy uptrend that continued into the October 2007 high at $373.62. A decline to $200 got bought in March 2008, but aggressive sellers returned less than two months later, triggering a brutal decline that relinquished the majority of the three-year gains.

The stock bottomed out at $123.65 in November 2008 and turned sharply higher into 2010, stalling at the .786 Fibonacci sell-off retracement level. That marked resistance until a 2012 breakout, yielding a rapid trend advance above $600, where it topped out in the first quarter of 2014. The stock broke out once again 18 months later, while the uptrend since that time has drawn a log scale  rising wedge pattern with no deep corrections. 

The monthly stochastics oscillator crossed into a sell cycle in February, predicting at least six to nine months of relative weakness. It has just reached the panel's midpoint, showing no signs that it will abort this bear cycle and turn higher. The indicator has also dropped to the lowest low since August 2016, suggesting a pick-up in selling pressure that translates into lower prices. That's a big deal because the March decline tested four-year wedge support, raising the odds for an eventual breakdown that drops the stock into a primary downtrend.

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GOOGL Short-Term Chart (2016 – 2018)

Volatile price action since October 2017 has carved a potential double-headed head and shoulders top that requires a steep descent from current levels to complete the right shoulder. A breakdown would generate a 200-point measured move target, dropping the stock below $800. The 200-week exponential moving average (EMA) has now aligned with that level, adding weight to the bearish prediction, but the moving average hasn't been tested or touched since 2011.

Price action between June 2016 and January 2018 carved an Elliott five-wave advance, with a telltale continuation gap situated near the 50% retracement level. This placement suggests that the price zone between $892 and $925 will mark a first downside target if the stock breaks wedge support. It also marks a price zone where dip buyers could jump in and regenerate a sizable recovery rally.

On-balance volume (OBV) has been gaining ground within a rising channel since the fourth quarter of 2015, signaling intense institutional sponsorship. The indicator hit a new high in March, but new shareholders haven't gotten paid yet, suffering through the 192-point drop into the month's end. Ominously, the indicator may be carving a smaller version of the head and shoulders pattern, waving another red flag for this over-loved tech giant. (For more, see: Alphabet's Bulls Get More Bullish as Earnings Near.)

The Bottom Line

Alphabet stock may complete a long-term topping pattern following the next decline into the double digits, setting off major sell signals. (For additional reading, check out: Top 4 Companies Owned by Google.)

<Disclosure: The author held no positions in aforementioned securities at the time of publication.>