Tuesday, March 23, 2010

Google: China Beat Down

Google


Overview
GOOG is down -1.96% for the week, up +4.21% for the month, down -11.45% for the year, and up +88.73% since the March 9, 2009 market bottom. Googzilla has pulled back from the MTD closing high of 581.14 on Thursday, March 11. The censorship conflict with China, and high probability of leaving the huge Chinese market, has damaged the stock price.  Actually, GOOG's short-term operating performance is expected to be very good, exceeding Q1 estimates.  Of course, it's the long-term outlook, with the seeming loss of the Chinese market, that is of concern.

Noteworthy Closing Prices on daily chart below:
Current 549.00 (Third highest yellow horizontal line)
2010 YTD 1-4-10 High 626.75 (Highest yellow horizontal line)
YE 12-31-09 619.98 (Second highest yellow horizontal line)
10 Month EMA 516.69 (Lowest yellow horizontal line)


GOOG: Back to October 2009 Prices



Intermediate-Term Trend
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, still indicates an ongoing bear market since February 1 for GOOG. That is, the 25d sma is less than the 50d sma. This reveals the depth of the 2010 pullback. This pullback created price damage that has not been repaired through sustained higher prices.  However, this indicator is about to change to a bull market signal, perhaps tomorrow, Wednesday, March 24.  More on this below...

Resistance and Support
Presently, resistance is not GOOG's problem, solid support is the issue.  GOOG remains below the January 4, 2010 closing high and the 12-31-09 YE close, both now recent resistance. GOOG is below the stair stepping November 2009 highs, which are also resistance.  The current close, the third highest yellow horizontal line, is in the October 2009 trading range, which is acting as recent support, along with long-term support back in April through July 2008.  GOOG found support today, Tuesday, and bounced up late in the day.

Moving Averages
The 25d sma bottomed on March 1 and began ascending. The 50d, continues descending. The 100d sma has leveled off and 200d sma continues ascending. Most bothersome has been the 25d sma breaking down through the 50d and 100d sma's plus the 50d sma breaking down through the 100d sma on March 4.. GOOG has broke down through the 25d, 50d, and 100d sma's during this China Beat Down.

Uptrend Line
The uptrend line, a rate of price ascent, is from the November 24, 2008 closing low of 257.44 up through the February 25, 2010 closing low of 526.43. The February 25 closing low has been the bottom for the 2010 pullback to date. GOOG has stayed above this uptrend line since the next day, February 26 - but - almost pinned it on Tuesday, March 23 at the bottom of the trading day before rallyiing.

Downtrend Line
The yellow downtrend line, a rate of price descent, is from appoximately the November 6, 2007 all-time closing high of 741.79 down through the January 4, 2010 high of 626.75, the peak YTD closing high so far. GOOG is wel below this downtrend line.

Relative Strength Index (RSI)
RSI 10 day = 40.60 is nearing oversold; has dropped from lower 90s earlier in March
RSI 25 day = 52.95 is reasonable; has dropped from lower 70s earlier in March
The RSIs can drop a lot more, of course, but oversold conditions are developing.

MACD (12,26,9)
The MACD became bearish today, March 23.  The MACD had been bullish since March 9.

Long-Term Trend
The lowest horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. GOOG is above this signal at the current close, the third highest yellow horizontal line.

Conclusion
Is the China Beat Down over for GOOG?  GOOG is on both recent and long-term support and did rally off the lows today, March 23, with good volume.  The RSI 10 day and 25 day are reasonable, on downward trends towards oversold conditions.  The MACD did signal sell today.  GOOG's problem is the censorship dispute with China and potentially being banned from world's largest national Internet market. The 2010 YTD lows in the 530 or lower area could possibly be tested.  However, I personally believe this won't happen and that the China Beat Down is about over.  That is, the potential loss of the Chinese market is mostly priced in.  If China does throw Google out, another dip is possible and then the bottom would be in.  The intermediate-term trend remains bearish. The long-term trend remains bullish.  Google is going to be around a long time.  This should be interesting, lol.

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