Saturday, October 9, 2010

Google Rallies This Week (Charts) *Earnings to be reported on Thursday* GOOG


Google will report quarterly financial results on Thursday, October 14, after market close, at 1:30 p.m. PT

Google Overview

GOOG Google rallied with the equity markets this week to close at $536.35 on Friday, October 8, 2010. Google is up +2.04 for the week, up +2.01 in October, but still down -13.49% for the year. GOOG is still up a market-beating +84.38% since the March 9, 2009 market bottom. This equates to a gain of +$10.73 for the week, an +$10.56 for October, a painful -$83.63 for the year, but an amazing +$245.46 since the March 9, 2009 market bottom. GOOG is down a dismal -14.42% or -$90.40 from the 2010 YTD high of $626.75 on January 4. GOOG has now stayed above the descending 200 day simple moving average for 11 consecutive trading days.

S&P 500 By comparison, the overall market, the S&P 500, is up +1.65% for the week, up +2.10% for October, up +4.49% for the year, and up +72.22% since the March 9, 2009 market bottom. SPX is down -4.28% 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 Rally Resumes, Bulls continue upwards 5 of last 6 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, negating this earliest Death Cross.

Google News and Fundamentals Current Google financial data is at the Google Financial Performance page. 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 had been drifting, without direction, due to uncertainty on current and future growth rates. However, GOOG has risen with, actually been a leader of, the market rally that began in September. GOOG is currently trading at 23.20 PE (ttm) with an EPS of 23.11. GOOG has been trading for most of 2010 with a PE in the low 20s. Even now, the current GOOG price of $525.62 appears low, yet continues to reflect some uncertainty over the future growth rate. Revenues from outside of the United States totaled $3.53 billion, representing 52% of total revenues in the second quarter of 2010.

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

Google Rallies This Week

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

Noteworthy Closing Prices on Daily Chart Below
Current Close: $536.35
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 (+2.01%).

Resistance Because GOOG is below the YTD and all-time high set in January, there are multiples levels of resistance above. The lower 540s appear to be the next definitive resistance: the peaking action of February 18 and 22 with closing prices of 543.22 and 542.80, respectively. GOOG has entered additional resistance, the sideways trading of late April and early May 2010. In addition, GOOG is just at mid-range of heavy consolidation trading occurring from late January through late February 2010. These could be significant resistance. Further gains by Google will be hard won. GOOG continues 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 still far away, resistance and benchmark prices.

Support Because GOOG is above the YTD lows, there are multiple levels of support below. Current support is the recent closing peak, on September 27, of 530.41 (the higher yellow horizontal line on the daily chart above). GOOG closed on this support October 7 and bounced above on October 8. The descending 200 day simple moving average (520.64) was resistance but is now recent support. The top of the recent summer trading range, the closing price of 508.10 on August 5, is benchmark support (the lower yellow horizontal line on  the daily chart above). These are critical support for GOOG to stay above 500.

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 has leveled off, began slightly 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 continues well below this downtrend line.

Relative Strength Index (RSI) The RSI 14 day = 71.04 is marginally overbought, descending due to recent consolidation trading, and 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 of 94.12 was reached on September 27. The RSI 28 day = 79.21 is overbought, ascending, and well above the 38.28 and 38.94 on August 31 and 24 and also above 2010 lows in the mid-20s. The RSIs have been pulled upwards by the rally yet but are not extreme.

MACD (12,26,9) The MACD = +0.92, flipped to bullish on September 7, and has downtrended since September 27. This has been somewhat of a negative divergence.

Volume GOOG traded 2.9M shares on Friday, October 8, 2010.  The 20 day moving average is approximately 3.0M and slightly uptrending. Volume spiked as GOOG reached and surpassed the top of the trading range.

Long-Term Trend The 10 month exponential moving average of 507.71 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 The Q2 financial results, reported in July, disappointed but were more mixed than totally disappointing. Google is still an extraordinary cash flow machine! GOOG had struggled below $500, the Bear Abyss, until September 2. GOOG has now been above $500 for 15 consecutive trading days. GOOG has rallied with the market and actually outperformed the market during the market rally in September and October. The moving averages reveal the price weakness and include two Death Crosses. GOOG has surprisingly rallied above the recent trading range but faces difficult resistance above. Google is now valued higher than the close on July 15 (494.02), just before the "disappointing" Q2 financial results were reported. Earnings season, ongoing economic data, and Google's quarterly financial results on October 14 will determine if GOOG, and the overall stock market, continue upwards. The intermediate-term trend is bullish and the long-term trend is bullish.

Google Monthly Chart

Below is the monthly GOOG chart since June 2005. 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 507.71, which is the long-term bull or bear market signal. GOOG rallied above 10m ema on September 24 and the current close of.536.35 is continues above, indicating a long term bull market.

About Google

Google market capitalization is now 11th largest in USA at $170.94B, behind #1 Exxon $327.81B and #2 Apple $268.65B. Google is the 4th largest technology company in USA by market capitalization behind Apple, Microsoft, and IBM. Current Google financial data is at the Google Financial Performance page. On a worldwide basis, Google employed 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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