Saturday, May 15, 2010

Google: In Bear Mode


Google is up +2.92% for the week, down -3.46% for the month, down -18.14% for the year, and up +74.47% since the March 9, 2009 market bottom. GOOG set a YTD closing low on Friday, May 7 of 493.14 before rebounding this past week  Google's short-term operating performance has been very good. Of course, it's the long-term outlook, with investors concerned about the possible (probable?) loss of the Chinese market, that is of concern.  More comments on Google's overall situation is at the end of this post.

Google Daily Chart
Below is the GOOG daily chart for 2010.

Noteworthy Closing Prices on Daily Chart below:
Current 507.53 (Lower yellow horizontal line)
2010 YTD 1-4-10 High 626.75
YE 12-31-09 619.98
10 Month EMA 518.57 (Higher yellow horizontal line)

GOOG: In Bear Mode

Intermediate-Term Trend
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, flipped to an intermediate-term bear market on Tuesday, May 4. That is, the 25d sma is now less than the 50d sma. The market pullback, Flash Crash, and general malaise of GOOG stock pulled the sma's down.

The current price is well below the January 4, 2010 YTD closing high and the 12-31-09 YE close, both now important recent, and far away, resistance and benchmark prices. The May 10 peak of 521.65 is the next upward benchmark.  Important resistance above is the trading range of late January through early March.  GOOG is just below.

Support, GOOG needs Support!
Solid support has been critical for GOOG during the China, Apple iAd, Q1 Earnings, & Eric Schmidt Beat Downs plus the general market pullback and Flash Crash.  However, the support has been lower and lower.  GOOG set another YTD closing low on Friday, May 7 of 493.14 before rebounding some this week.  GOOG has pulled back to early October 2009 prices.

Moving Averages
GOOG has broken down through, and remains below, the 25d, 50d, 100d, and 200d simple moving averages.  The 25d, 50d, and 100d sma's are descending.  The 25d is below the 50d and 100d sma's.

Uptrend Line
The uptrend line, a rate of price ascent, is from the November 24, 2008 closing low of 257.44 up through the May 7, 2010 closing low of 493.14, the new 2010 YTD closing low.  GOOG had broken down through a previous uptrend line, so this is a new, redrawn uptrend line.  GOOG has bounced up above the uptrend line on May 10, but pinned it on May 14.

Downtrend Line
The downtrend line, a rate of price descent, is from approximately 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 continues well below this downtrend line.

Relative Strength Index (RSI)
RSI 14 day = 39.48 marginally, but has bounced up from an amazing low of 13.72 on May 5
RSI 28 day = 36.64 oversold; has bounced up from 31.25 on May 7
The RSIs have plunged on the GOOG sell off but still indicate oversold conditions.

MACD (12,26,9)
The MACD flipped to bearish on Friday, April 16 with a sell off and has remained so, although MACD is uptrending.

Long-Term Trend
The 10 month exponential moving average of 518.57,  the higher yellow line, is the line in the sand, so to speak, for the long term signal of a bull or bear market. GOOG is now below this indicator.  GOOG is now below this signal at the current close of 507.53.  GOOG is struggling with the long term bear signal.

GOOG is in an intermediate term bear market and now this week is in a long term bear market.  Are the Beat Downs over for GOOGGOOG is surviving, but barely.  GOOG closed below the critical 500.00 benchmark price on May 6 and 7, and has pinned below on May 14 - but GOOG is now above.  The RSI 14 day and 28 day are signalling oversold conditions. The MACD signal remains bearish.  The moving averages are bearish.  At this point, I think all that can be hoped for is GOOG stays above 500.00 and trades in the 500.00+ range.  Google is venturing into so many areas, yet significant revenue streams have not been developed from these efforts.  Until Google proves viable in an area other than online advertising, the stock may stay in limbo.

Google News & Fundamentals

Annual Shareholders Meeting
The Google Inc. stockholders meeting was Thursday, May 13.  CEO Eric Schmidt spoke and the gist of his message was: "All is well after a year of great tumult".  CEO Schmidt also commented on the China Censorship issue: the situation "seems to be stable", with Google redirecting search requests from mainland China through Hong Kong.  He mostly talked up the Google Android smartphone OS, currently at 28% of USA consumer sales (compared to Apple 21%).  65,000 Android OS phones are being shipped every day worldwide on 34 devices in 49 countries.

Google's internet license in China expired March 31 and Google has not attempted to renew it.  Google's  search is apparently working in mainland China, from Hong Kong.  However, Google is now at a competitive disadvantage in China to Baidu, the search engine market leader.

Long Term Outlook
Google beat Q1 estimates, but not analyst and investor expectations. Of course, it's the long-term outlook that is dampened by the Chinese issue and the world's largest internet market plus the Apple iAd. The question is how much investors will discount Google's PE. Google's PE TTM is now down to 23.00.  In comparison Baidu's TTM PE has reached an astronomical 98.64.  It's all about expectations and the market has reduced its expectations of GOOG and increased those of BIDU.

CNBC: American Titans
CNBC has done a feature on Google Inc., "Searching for More", the week of May 10 in their American Titans series.  Click here for the commentary and analysis in this feature.

Apple iAd
First China, then Apple takes a shot at Google. Steve Jobs and Apple announced April 8 a new mobile advertising platform along with the iPhone OS 4. The last few weeks have belonged to Apple, lol. Obviously, the iAd platform is a direct threat to Google's advertising revenues, since Apple has made it clear it is going in the mobile advertising business. First GOOG has a China Beat Down, then an Apple Beat Down. AAPL stock is reviewed by Apple Digest here.

Google Search Engine
The latest market share report showed GOOG has 64.4% of USA search engine market share in April, a decline from 65.1% in March.  Yahoo had 17.1% and Microsoft Bing 11.8%.

There's Android smartphones, Android smartphone OS, Google Apps Marketplace, Chrome browser, Chrome OS, Google Apps cloud computing, Google Docs to compete with Microsoft Office 2010 online, etal.  What is making a net profit besides the online ad revenues???  The core business, online advertising, still accounts for 96% of GOOG business.  I think this question is weighing on GOOG stock and investor confidence and expectations.

Quarterly Earnings
Google beat Q1 estimates but not expectations, but that's not all - CEO Eric Schmidt was not on the Q1 conference call for first time and without pre-announcement.

The Curious Case of Google CEO Eric Schmidt
Schmidt was not on the Q1 Earnings conference call on Thursday, April 15. It was announced he would not be henceforth, period. With the recent accusations of Google being hacked from China, the China censorship issue, Apple CEO Steve Jobs introducing the direct competition of the iAd, and therefore the intense media's, analysts', and investors' scrutiny of Google, this was a PR disaster. At most, and worst, this is indicative of a problem between CEO Eric Schmidt and Google. Regardless, this absence of Schmidt spooked the market at a critical time when Schmidt should have been speaking to media, investors and analysts.


Seeking Alpha