Saturday, January 8, 2011

Google Begins 2011 Above $600 (Charts) *Regains 20 & 50 day averages* GOOG


There are high expectations for Google financial results in 2011

Google Overview

GOOG Google rallied above $600 this past week to close at $616.44 on Friday, January 7, 2011. Google was up +3.78% for the week and the same for the month and year. GOOG is up a market-beating +112% since the March 9, 2009 market cyclical low. This equates to an impressive gain of +$22.47 for the week, month, and year and up an incredible +$325.55 since the March 9, 2009 market bottom. GOOG is now down just -1.65% and -$10.33 from the 2010 closing high of $626.77 on November 8. After struggling in the Bear Abyss below $500, GOOG has been above $500 for 78 consecutive trading days (since September 20, 2010) and above $600 for 5 consecutive trading days (since January 3).

S&P 500 By comparison, the overall market, the S&P 500, was up +1.10% for the week and the same for the month and year. SPX is up +88% since the March 9, 2009 market cyclical low. SPX closed at a multi-year closing high of 1276.56 on Wednesday, January 5, 2011, the highest close since the September 2, 2008 close of 1277.57. GOOG has been outperforming the market since the March 9, 2009 market bottom, underperformed for 2010, and is outperforming 2011. A review of the S&P 500 is here [S&P 500 Starts the New Year Up +1.1% for the Week (Charts) *6 consecutive weekly gains*].

Google News and Fundamentals When Google will report Q4 2010 financial results has not been announced, but usually GOOG announces 10 days in advance and January 20 is the unconfirmed date. Google was in the news in December as a result of the Google Chrome Event on December 7. In addition, Google announced the launch of the Samsung Nexus S Android (Gingerbread OS) smartphone and the opening of the eBooks Store. At the Google Chrome Event, the Chrome Web Store was launched, the Chrome Notebook was unveiled, which is planned to be consumer-ready by mid-2011 with Acer and Samsung as the first manufacturers, and Google announced the Chrome browser user base had increased +300% in 2010 with a conservative count of 120+ million active users. More innovation is coming for the Chrome browser, based on speed via Chrome Instant. Finally, Andrew Rubin tweeted on December 9 that 300,000 Android phones are being activated daily, which is a blowout number. This was after the negative news that the EU had launched an anti-trust investigation. Google reported excellent Q3 earnings which are reviewed and analyzed on this blog. Q4 2010 is expected to be financially strong. Current Google financial data, charts, and review is at the Google Financial Performance page, updated for the latest Q3 financial results reported on October 14. A review and analysis of the most recent Q3 earnings call is at the Google Earnings Conference Call page. Our valuation and target price of GOOG stock is posted at the Google Stock Valuation page. 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 EconomyFinancial Controls, and Baidu Planet. Additional current commentary on both the overall stock market and economy is posted at Matrix Markets.

Google Begins 2011 Above $600

Google Daily Chart Below is the GOOG daily chart since October 14, when Google reported calendar Q3 earnings after market close and gapped up the next day. This is to illustrate the recent applicable price interactions with the current close, resistance, and support. A monthly chart is included lower on this page for a longer-term perspective.

Noteworthy Closing Prices
Current Close: $616.44
2010 High November 8: $626.77
2010 Low July 6: $436.07
YE December 31, 2010: $593.97
YE December 31, 2009: $619.98
Cyclical Low November 24, 2008: $257.44

* The 200 day simple moving average and the uptrend line are not shown on the daily chart. *

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, generated a sell signal on Tuesday, December 14, after being in buy mode since September 30. Therefore, GOOG is in an intermediate-term bear market. That is, the 25d sma is now less than the 50d sma. However, the relationship between these two moving averages is a lagging indicator. The 25d sma is now ascending (not shown on the daily chart above) and the 50d sma is leveling off. The 25d crossing above the 50d should occur this next week, which would indicate a bull market once again.

Resistance Current resistance is the 618.00 area, which GOOG has had previous interactions with as far back as late 2007. GOOG pinned through on both January 6 and 7 with intraday highs of 618.43 and 618.25, respectively. However, GOOG pulled back by the end of the day to close below. Higher key resistance is the 2010 closing high of 626.77 on November 8.

Support GOOG has multiple levels of support below and apparently stronger buyer conviction. Important support is the 607-608 area, related to the October 19 and 20 closes of 607.83 and 607.98, respectively. Additional support is the Wednesday, December 22 closing peak of 605.49. Current support is the 20 day simple moving average of 593.90. Next support is the 591 area related to closings in mid-November and mid-December. Benchmark supports is the benchmark 600 price, including the 20 day simple moving average of 600.15 and the 50d sma of  day simple moving average of 598.68.

Moving Averages GOOG is now above all the moving averages monitored: 20, 25, 50, 100, and 200 day simple moving averages. The 20d is now ascending and has crossed above the 50d. The 25d sma is now ascending and about to cross above the 50d. The 50d has is leveling off after descending. The 100d is ascending strongly and the 200d is ascending.

Uptrend Line (Not shown on the daily chart) The yellow uptrend line, a rate of price ascent, is from the November 24, 2008 cyclical 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 well 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 November 8, 2010 high of 626.77, the 2010 closing high. GOOG has remained below since but is close to rising above.

Relative Strength Index (RSI) The RSI 14 day = 72.37 slightly oversold, ascending, and below the recent peak of 89.05 on December 20. The recent low was 17.01 on August 24 and the unbelievable low of 4.79 on July 6. A multi-year high, of 94.12 was reached on September 27, 2010. The RSI 28 day = 63.22 is reasonable and ascending. The 2010 and multi-year high was 87.87 on October 18. The 2010 lows have been in the mid-20s. Both RSIs are away from any extremes.

MACD (12,26,9) The MACD = +1.58 is ascending and continues positive since December 10, after being negative for 27 consecutive trading days. The 2010 and multi-year high was +7.27 on October 19. The 2010 and multi-year low was -8.30 on November 17.

Volume Volume was higher this past week and was 2.1M on Friday, January 7. The 20 day simple moving average of approximately 1.8M has leveled off from descending. The high has been an incredible 14.8M shares on October 15, 2010 (the day after Q3 earnings release), a multi-year high. By comparison, the 50 day sma has leveled off from descending and approximately 2.3M. Buyer conviction and enthusiasm after the Q# 2010 earnings report waned and as GOOG approached the 2010 YTD closing high of 626.75. Investor interest, and volume, is increasing calendar Q4 2010 earnings report nears.

Long-Term Trend The 10 month exponential moving average of 551.67  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 since. GOOG had been mostly below from April to August in 2010.

Conclusion On October 14, Google reported excellent Q3 earnings which are reviewed on the Google Financial Performance page  A review and analysis of the most recent Q3 earnings call is at the Google Earnings Conference Call page. The Great Google is still an extraordinary cash flow machine! Google has set the bar high for the future and EPS growth. The intermediate-term trend turned bearish on December 14 but the the long-term trend continues bullish. The line in the sand continues to be $600, which GOOG has yet again rallied above. Will buyer confidence maintain GOOG above $600? We think so. More about Google the value of GOOG stock on the Google Stock Valuation page.

Google Monthly Chart

Below is the monthly GOOG chart from the November 24, 2008 cyclical closing low of 257.44 . The overall analysis and commentary is the same as for the daily chart above. The yellow uptrend and downtrend lines are the same, and as described, on the daily chart discussion above. The white moving average line is the 10 month exponential moving average, which is the long-term bull or bear market signal. GOOG rallied above 10m ema in September 2010 and the current close continues above, indicating a long term bull market.

We are long GOOG.

About Google

The rally this past week propelled Google's market capitalization to 4th largest in the USA at $197.12B, behind #1 Exxon $381.17B, #2 Apple $308.33B, and #3 Microsoft $244.69B. Google is the 3rd largest technology company in the USA by market capitalization behind Apple and Microsoft. Just in the past couple of months, Google was 13th largest overall company and 4th largest technology company by market capitalization, until the spectacular rally on excellent Q3 earnings. Current Google financial data is at the Google Financial Performance page. A review and analysis of the most recent Q3 earnings call is at the Google Earnings Conference Call page. More about Google the value of GOOG stock on the Google Stock Valuation 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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