Another Google Update + Bonus Material

Goog2006228 This is my first Google (NASDAQ: GOOG) update since about February 14th, when I highlighted the bounce trade opportunity, which in fact materialized and took GOOG precisely back to the underside of it’s 50-day EMA, which is generally the place to enter your first or second short on a stock that has broken down, such as GOOG.  Here are some more important facts:

Today’s volume was the second highest in GOOG’s entire trading history, which is shown above.  When was the highest volume day for GOOG?  About 5/6 weeks ago, when it initially broke below its 50-day EMA.  Note that the stock did get a 2/3 day bounce after that initial breakdown, and it may get something similar now.  In fact, today’s candle shows a rally did develop and carry into the close once the stock touched its 200-day EMA.  Note, however, the big picture on GOOG’s chart: (1) The 2-month series of lower highs and lower lows, (2) the gap below the 50-day EMA and failure to recapture that level, (3) the now month long downward slope of the 50-day EMA, (4) today’s failure at the 50-day EMA.


This GOOG story we have been analyzing shows that some very basic chart and news flow / mass media / psychological analysis can and does work in the stock market.  Cheers!


Bonus Material: Here’s why you buy on the technicals and the fundamentals, but sell on the technicals alone (usually).


Wsjhomepage200631b Stocks almost always, always, always (and I hate the words “always” and “never”) break down before the fundamental flaws appear.  This is because, to state the obvious I hope, that markets are FORWARD LOOKING, usually about a few months to a max of about a year forward.  In Google’s case, here we see the Wall Street Journal front page, center section story: “Google Warned Blah, Blah, Blah.”  This is the news that has been being discounted in GOOG’s stock price for the past few months.  By the way, the front page screaming headline and yesterday’s screaming action mean, contrarily, that we might actually see some follow through on yesterday’s intra-day rally.  We will see.  If/when that fails it may be a reasonable opportunity to short GOOG again, although this trade is more obvious and crowded than it was when I first started highlighting its potential in December and January.  Cheers!