Saturday, October 16, 2010

Google Is Back! (Charts) *Reports excellent Q3 earnings, up $60.52 on Friday* GOOG


Google reported excellent Q3 financial results on Thursday, October 14

Google Overview

GOOG Google created its own rally this last week with excellent Q3 earnings reported on Thursday, to close up +$60.45 at $601.45 on Friday, October 15, 2010! Google is up +12.14% for the week, up +14.39% in October, and now only down -2.99% for the year. GOOG is up a market-beating +106.76% since the March 9, 2009 market bottom. This equates to a gain of +$65.10 for the week, up +$75.66 for October, down -$18.53 for the year, and up an amazing +$310.56 since the March 9, 2009 market bottom. GOOG is down -4.04% or -$25.30 from the 2010 YTD high of $626.75 on January 4. GOOG has now stayed above the descending 200 day simple moving average for 16 consecutive trading days.

S&P 500 By comparison, the overall market, the S&P 500, is up +0.95% for the week, up +3.07% for October, up +5.48% for the year, and up +73.86% since the March 9, 2009 market bottom. SPX is down -3.38% from the April 23, 2010 YTD closing high of 1217.28. So, GOOG has been under performing the market YTD in 2010. GOOG has now outperformed the market since the March 9, 2009 market bottom and during this current market rally.  A review of the S&P 500 (S&P 500 Posts Another Weekly Gain (Charts) *Bulls rally 6 of last 7 weeks*) is here.

Death Crosses and Reversal 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. However, the 50d sma has now regained the 100d sma, on September 27, negating this earliest Death Cross.

Google News and Fundamentals Current Google financial data, charts, and review is at the Google Financial Performance page. Google reported excellent Q3 earnings which are reviewed on that page. GOOG is currently trading at 24.43 PE (ttm). Earnings per share for the past 4 quarters have been: Dec09 $6.13, Mar10 $6.06, Jun10 $5.71, Sep10: $6.72, which totals $24.62. At the current GOOG stock price of $601.45, that's a PE of 24.43 (ttm). GOOG has been trading for most of 2010 with a PE a little lower in the 20s. Even now, the current GOOG price of $601.45 appears low, yet continues to reflect some uncertainty over the future EPS growth rate. Revenues from outside of the United States were 52% of total revenues in the third quarter of 2010.

Economic and Market News Information about the USA and world economies is posted at Boom Doom Economy and Financial Controls.

Google Is Back! Gaps Up on Friday!

Google Daily Chart Below is the GOOG daily chart since December 2009 to illustrate how far Google dropped from the January 2010 highs, how much Google has recovered (making up much of the lost ground in one day, October 15!), and recent resistance and support. A monthly chart is included at the bottom of this page for a broader perspective.

Noteworthy Closing Prices on Daily Chart Below
Current Close: $601.45
2010 YTD High, January 4: $626.75
2010 YTD Low, July 6: $436.07
YE December 31, 2009: $619.98

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, generated a buy signal on Thursday, September 30. That is, the 25d sma is greater than the 50d sma. However, the relationship between these two moving averages is a lagging indicator and finally caught up with GOOG's amazing September Bull Run +16.8%) that now continues into October (+14.4%).

Resistance Because GOOG is below the YTD and all-time high set in January, there are multiples levels of resistance above. In the past few weeks on these posts, it was stated further gains by Google would be hard won. The excellent Q3 earnings overcame that resistance. GOOG, on Friday, October 15, closed and stopped just short of the January 8, 2010 closing sub-peak of 602.02, which is now recent resistance (the higher yellow horizontal line on the chart above). The next significant resistance above is the peaking action from the December 28-31, 2009 closings of 622.87, 619.40, 622.73, and 619.98, respectively. Next is the January 4, 2010 YTD closing high of 626.75.

Support Because GOOG is above the YTD lows and summer trading range, there are multiple levels of support below. Current support is the closing sub-peak, on April 15, of 595.30 (the lower yellow horizontal line on the daily chart above). Next significant support is the sub-peak close of 581.14 on March 11. The descending 200 day simple moving average (518.99) was resistance but is now distant support.

Moving Averages GOOG has now regained all the moving averages on the daily chart above: the 25, 50, 100, and 200 day simple moving averages. The 25d sma is now ascending steeply and has regained the 50d and 100d sma's and is approaching the 200d sma. The 50d bottomed on September 8, is now ascending, has regained the 100d sma, but is still below the 200d sma. The 100d is ascending, but is below the 200d. The 200d continues to descend showing the price damage GOOG has suffered this year that this rally is slowly mending.

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 broke down through this trendline on August 30 and 31, but bounced above on September 1 and has remained above since.

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 gapped up on October 15 to regain downtrend line for the first time since the YTD high on January 4!

Relative Strength Index (RSI) The RSI 14 day = 82.47 is now overbought, pulled up higher by the October 15 gap up. This is well above the recent low of 17.01 on August 24 and the unbelievable low of 4.79 on July 6. A 2010 YTD high, and multi-year high, of 94.12 was reached on September 27. The RSI 28 day = 87.20 is overbought, pulled up higher by the October 15 gap up, and is a 2010 YTD high and also a multi-year high. This is well above the 2010 lows in the mid-20s. The RSIs have been pulled upwards by the rally and spiked up on the October 15 gap up.

MACD (12,26,9) The MACD = +3.68, spiking upwards with the October 15 gap up, after being +0.18 the day before.

Volume GOOG traded an incredible 14.8M shares on Friday, October 15, 2010, a YTD and multi-year high. The 20 day moving average is approximately 3.8M, is uptrending, and was 3.1M two days before! By comparison, the 50 day sma is approximately 3.0M.

Long-Term Trend The 10 month exponential moving average of 515.55 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 rallied above this indicator in September and has stayed above in October. GOOG had been mostly below this long term bear signal from April to August.

Conclusion On Thursday, Google reported excellent Q3 earnings which are reviewed on the Google Financial Performance page Google is still an extraordinary cash flow machine! Cash Flow from Operations per Share for the past 4 quarters were Dec09 $8.48, Mar10 $8.01, Jun10 $6.47, Sep10 $8.95, which totals $31.95. At the current GOOG stock price of $601.45, that's a Cash Flow Multiple  of 18.82 (ttm), which appears very reasonable. After struggling in the Bear Abyss below $500, GOOG has now been above $500 for 20 consecutive trading days, is now above $600, and should continue above $600. GOOG had rallied with the market and actually outperformed the market during September and October - before the excellent Q2 earnings announcement. Earnings season and ongoing economic data will determine any continued rally for GOOG after the glow of Q3 earnings wear off. Google has set the bar high for the future and EPS growth. The intermediate-term trend is bullish and the long-term trend is bullish.

Google Monthly Chart

Below is the monthly GOOG chart since October 2007, including the all-time highs of November 2007. The overall analysis and commentary is the same as for the daily chart above. The current price, the yellow horizontal lines, and the yellow uptrend and downtrend lines are the same, and as described, on the daily chart above. The white moving average line is the 10 month exponential moving average of 515.55, which is the long-term bull or bear market signal. GOOG rallied above 10m ema on September 24 and the current close of.601.45 continues above, indicating a long term bull market.

We took a position in Google this past week, we are long GOOG.

About Google

Google market capitalization is now 7th largest in USA at $191.69B, behind #1 Exxon $331.693B and #2 Apple $287.53B. Google is the 3rd largest technology company in USA by market capitalization behind Apple, and Microsoft. Just in the past weeks, Google was 13th largest overall company and 4th largest technology company by market capitalization, until this spectacular rally on excellent Q3 earnings. Current Google financial data is at the Google Financial Performance page. Headcount: On a worldwide basis, Google employed 23,331 full-time employees as of September 30, 2010, up from 21,805 full-time employees as of June 30, 2010.

Google describes itself in press releases as, "Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google's targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia."

Google's Mission Statement: "Google's mission is to organize the world's information and make it universally accessible and useful. The first step toward fulfilling that mission came when our founders, Larry Page and Sergey Brin, working out of a Stanford University dorm room, developed a new approach to online search that quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- a free service whose utility and ease of use have made it one of the world's best-known brands almost entirely through word of mouth from satisfied users."

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