Monday, September 6, 2010

Google Continues Below $500 in Trading Range (Charts) GOOG


Google market capitalization is 14th largest in USA at $149.89B, behind #1 Exxon $312.23B and #2 Apple $236.40
Google is the 4th largest technology company in USA by market capitalization behind Apple, Microsoft, and IBM
GOOG last 12 months sales were $23.65B

Google Overview

Google rallied with the stock markets this week to close on Friday, September 3 at $470.30, but did not regain the 50, 100, or 200 day simple moving averages. This shows the GOOG price weakness since peaking on August 5 with a close of $508.10. Google is up +2.50% for the week, up +4.51% for the month, down a -24.14% for the year, and up +61.68% since the March 9, 2009 market bottom. This equates to +$11.47 for the week, a +20.28 for the month, a painful -$149.68 for the year, and +$179.41 since the March 9, 2009 market bottom. GOOG is down -24.96% or -$156.45 from the 2010 YTD high of $626.75 on January 4.

By comparison, the overall market, the S&P 500, is up 3.75% for the week, up +5.26% for the month, down -0.95% for the year, up +63.26% since the March 9, 2009 market bottom, and down -9.26% from the 2010 YTD high on April 23. So, GOOG has been underperforming the market YTD in 2010. GOOG has been comparable to the the market since the March 9, 2009 market bottom. A review of the S&P 500 (S&P 500 Rallies Above 50 Day Moving Average) is here.

Death Crosses A third Death Cross occurred on June 4, the 100 day simple moving average crossed below the 200 day simple moving average. Previously, the 50 day simple moving average crossed below the 200 day simple moving average - the Death Cross or Black Cross, on May 25. Earlier, the 50d sma had crossed below the 100d sma on March 4. GOOG YTD closing low was on July 6 at 436.07.

Google News and Fundamentals Google reported Q2 earnings in July and the financial results were very good, but below expectations. GOOG's problem is growth, that is, Google is becoming so large that the heady growth rates of the past cannot be maintained. Hence, the stock is drifting, without direction, due to uncertainty on current and future growth rates. "General  malaise" comes to mind with GOOG. GOOG is currently trading at 20.35 PE (ttm) and the EPS is 23.11. GOOG has been trading with a PE in the low 20s, which makes the current GOOG price of $470.30 probably a little low.

Economic and Market News A review and chart of the USA quarterly GDP as reported by the BEA (USA Q2 GDP Revised Downward to 1.6%) is here, which shows a downward trend. A review and chart of the ECRI Weekly Leading Index (USA Weekly Leading Index Dips To 6-Week Low "No re-acceleration of growth on the horizon") which shows bottom bouncing is here. A review and chart of The Conference Board monthly Leading Economic Index (USA Monthly Leading Economic Index: Double Dip Recession or Bottom Bouncing?) is here. Whether the USA GDP, WLI, and LEI have bottomed, will begin recovery, or continue downwards represents the "unusually uncertain" economic outlook that FRB Chairman Bernanke was talking about (Fed Chair Bernanke: Moderate Recovery, Outlook "Unusually Uncertain") and is reviewed here. The IMF issued a partial update of their semi-annual World Economic Outlook as of June 30 (IMF Update: Global Recovery Continues) which is reviewed here. In summary, the IMF sees the world economic recovery continuing. However, it does appear a second half 2010 slowdown is in progress for the world and the USA.

Google Continues Below $500

Google Daily Chart Below is the GOOG daily chart since early May 2010. A monthly chart is included at the bottom of this page for a broader perspective.

Noteworthy Closing Prices on Daily Chart Below
Current $470.30 (Yellow horizontal line)
2010 YTD 1-4-10 High $626.75
2010 YTD 7-6-10 Low $436.07
YE 12-31-09 $619.98
10 Month EMA $486.38

Trading Range As noted with the S&P 500 (S&P 500 Rallies Above 50 Day Moving Average) being in a trading range here, GOOG begin a trading range after the 2010 YTD closing low on July 6 of $436.07. The highest closing price subsequently has been 508.10 on August 5 (the highest yellow horizontal line on the daily chart below). The lowest closing price since has been 436.07 on July 6 (the lowest yellow horizontal line on the daily chart below). Based on these parameters, the GOOG at $470.30 is now ascending towards the midway point in the trading range. Support was shown at 451.39, 450.98, and 450.02 on August 23, 26, and 31  GOOG, and the market, rallied above. This support area could be argued as the "new bottom" of the trading range.

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, generated a buy signal on August 6. That is, the 25d sma is greater than the 50d sma. Previously, a sell signal had been in effect since May 4.

Resistance Because GOOG is below the YTD and all-time high, there are multiples levels of resistance above. The previous recent closing low of 472.05 on May 21 failed as support on July 16 and now has become resistance. The close on July 15 just before Q2 financial results were reported is benchmark resistance at 494.02. The recent closing highs of 505.35 and 508.10 on August 9 and 5 are resistance and milestone prices. These prices are the first of many levels of resistance above that GOOG needs to regain and close above. GOOG is well below the January 4, 2010 YTD closing high and the 12-31-09 YE close of 626.75 and 619.98, respectively, both now important, and far away, resistance and benchmark prices.

Support Because GOOG is above the YTD lows, there are multiple levels of support below. The recent closing lows of 451.39, 450.98, and 450.02 on August 23, 26, and 31 are key recent support. Ultimate support is the 2010 YTD closing low of 436.07 on July 6. That's the goal line stand for GOOG.

Moving Averages GOOG is below all the simple moving averages on the chart: 25d, 50d, 100d, and 200d. These sma's have spread out in a bearish fan. The 25d sma is descending and below the 100d and 200d sma's. The 50d is slightly descending but about to level off and below the 100d and 200d sma's. The 100d is descending sharply and below the 200d. The 200d is descending. All of this is very bearish.

Uptrend Line The yellow uptrend line, a rate of price ascent, is from the November 24, 2008 closing low of 257.44 up through the July 6, 2010 YTD closing low of 436.07. GOOG broken down through this trendline on August 30 and 31 but bounced above on September 1.

Downtrend Line The yellow 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) The RSI 14 day = 41.69 is leaning oversold but is well above the recent low of 17.01 on August 24 and the unbelievable low of 4.79 on July 6. The RSI 28 day = 42.97 is leaning oversold but is above 38.28 and 38.94 on August 31 and 24 and also above 2010 lows in the mid-20s. The RSIs are above the YTD lows with plenty of upside.

MACD (12,26,9) The MACD is slightly bearish (-0.18) and has been bearish since August 13. The MACD has been uptrending since August 24.

Volume GOOG traded 2.5M shares on Friday, September 3, is above the the 20 day moving average of approximately 2.36M. Volume has been trending downwards since July 16, the day after the Q2 earnings release.

Long-Term Trend The 10 month exponential moving average of 486.38 is a long-term indicator and shown on the monthly chart below. That is the line in the sand, so to speak, for the long term signal of a bull or bear market. GOOG continues below this indicator. GOOG has been mostly below this long term bear signal since May.

Conclusion The Q2 financial results, reported in July, disappointed but were more mixed than totally disappointing. GOOG continues in an intermediate term bear market and a long term bear market. GOOG has struggled below $500, the Bear Abyss. GOOG rallied with the market this past week. The RSI 14 and 28 day are leaning oversold and above the YTD lows. The MACD is bearish, but this may be short-lived. The moving averages are in a bearish fan and include three Death Crosses. GOOG appears to be in a trading range for the foreseeable future.

GOOG Monthly Chart

Below is the monthly GOOG chart since January 2005 for a long-term perspective. The overall analysis and commentary are the same as for the daily chart above. GOOG appears to be in a trading range, indicated by the higher and lower yellow horizontal lines. The yellow downtrend and uptrend lines are the same, and as described, on the daily chart above. The white moving average line is the 10 month exponential moving average, which is the long-term bull or bear market signal, as discussed above with the daily chart.

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