To The Moon

Alphabet’s latest sell-off has created an interesting technical situation. After a disappointing earnings report sent shares sharply lower, the stock has triggered a bearish signal known as a death cross.

For traders, this is a warning sign. For longer-term investors, however, the question is whether the signal is arriving too late to be useful.

Alphabet has already experienced a significant decline, with investors reassessing its AI strategy, advertising growth and the enormous cost of expanding its data-centre infrastructure.

The latest technical signal adds another reason for caution, but it does not necessarily mean another major decline is inevitable.

1. What exactly is a death cross?

A death cross occurs when a stock’s 50-day moving average falls below its 200-day moving average.

The 50-day moving average reflects shorter-term price momentum, while the 200-day moving average provides a longer-term trend indicator.

When the shorter-term average moves below the longer-term average, it suggests that recent price performance has weakened relative to the longer-term trend.

Alphabet’s 50-day moving average slipped below its 200-day average, triggering the signal.

However, there is an important limitation: moving averages are lagging indicators. They are calculated using historical prices, meaning the stock may have already experienced a substantial decline before the crossover occurs.

In other words, a death cross confirms that momentum has weakened. It does not tell us exactly where the bottom will be.

2. Is Alphabet already oversold?

There is another technical indicator worth watching: the Relative Strength Index (RSI).

The RSI measures the speed and magnitude of recent price movements. A reading below 30 is commonly considered oversold, although it does not guarantee an immediate rebound.

Alphabet’s 14-day RSI has fallen to around 23, indicating significant selling pressure.

This creates an interesting situation:

• The death cross suggests the broader technical trend is bearish.

• The low RSI suggests the stock has experienced an unusually sharp decline.

• The large earnings-related sell-off may have already forced some investors to reassess their positions.

These signals can coexist. A stock can be oversold and still continue falling if negative sentiment persists.

That is why I would not treat an oversold reading as an automatic buying opportunity.

3. What does Alphabet’s history tell us?

Interestingly, historical death crosses have not always been followed by further declines.

According to the historical analysis reported by MarketWatch, Alphabet experienced five death-cross signals over the past decade. Shares were higher six months later in four of those instances, with an average gain of 21.9%.

However, the outcomes were not consistent.

During the April 2025 market decline, a death cross coincided with a market bottom. In March 2022, the signal appeared before the stock experienced a further substantial decline.

This is an important distinction. The same technical signal can produce very different outcomes depending on the broader market environment and the company’s underlying financial performance.

Historical averages are interesting, but five observations are too few to establish a reliable trading rule.

4. The bigger issue is still Alphabet’s business performance

I would not let technical indicators distract from the reasons behind the sell-off.

Alphabet’s latest quarterly results raised several concerns:

• Revenue of $127.58 billion missed expectations.

• Adjusted earnings per share of $2.12 came in below forecasts.

• Google Cloud revenue surged 103% to $30.71 billion.

• Google Cloud operating income reached $10.64 billion.

• Free cash flow turned negative at $9.07 billion.

• Capital expenditure reached $34.98 billion, with full-year guidance increased to $185 billion–$187 billion.

Google Cloud’s growth is impressive, but investors are questioning whether the enormous investment in AI infrastructure will generate sufficient financial returns.

There is also the question of advertising. Search remains a major source of Alphabet’s profitability, and investors want reassurance that AI-powered search will strengthen rather than weaken its existing business model.

The technical picture may improve quickly if buyers return, but a sustainable recovery will probably require greater confidence in the company’s earnings and cash flow outlook.

5. What could signal that the selling is losing momentum?

Rather than trying to identify the exact bottom, I would watch for several developments.

Price stabilisation: Does Alphabet stop making lower lows and begin trading within a more stable range?

Trading volume: Does buying volume increase during recovery sessions? A rebound supported by stronger participation may be more convincing than a small bounce on light volume.

RSI recovery: Does the RSI move back above 30 and continue improving? This could suggest that selling pressure is easing, although it would not confirm a trend reversal by itself.

Moving-average recovery: Can the share price eventually regain its shorter-term moving averages? That would provide stronger evidence that momentum is improving.

Fundamental improvement: Does Google Cloud continue growing while capital expenditure becomes more manageable and free cash flow improves?

The final point is particularly important. A technical recovery without improving business fundamentals may prove difficult to sustain.

6. My view: A death cross is a warning, not a verdict

I think Alphabet is entering an important period for investors.

The company still has significant strengths: a dominant search business, a large advertising ecosystem, rapidly expanding Google Cloud operations and substantial AI capabilities.

But the market is demanding evidence that these advantages can translate into sustainable earnings and cash flow.

The recent decline may create an opportunity for investors who believe the market has overreacted to the earnings disappointment. However, there is also a risk that the market is beginning to price in a longer period of uncertainty around AI investment returns and search monetisation.

Personally, I would not buy simply because the RSI is oversold, nor would I automatically sell because a death cross has appeared.

I would prefer to see the stock stabilise, selling pressure ease and the next set of financial results provide better evidence that Alphabet’s AI investments are generating returns.

What Do You Think, Tigers?

Does Alphabet’s death cross suggest further downside, or could it be a lagging signal appearing after much of the sell-off has already happened?

Would you consider buying after such a sharp decline, or wait until the stock regains its key moving averages?

Is the bigger risk now technical momentum, or the uncertainty surrounding Google’s AI spending and future cash flow?

For discussion purposes only, not financial advice.