Saturday, January 1, 2011

Google Slips Back Below $600 (Charts) *Support at 20 day average* GOOG

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Will 2011 be a Breakout Year for Google?


Google Overview

GOOG Google slipped back below $600 this past week to close at $593.97 on Friday, December 31, 2010. Google was down -1.70% for the week, ended December up +6.88%, and ended 2010 down -4.20%. GOOG is up a market-beating +104.19% since the March 9, 2009 market bottom. This equates to a loss of -$10.26 for the week, up +$38.26 for December, down -$26.01 for 2010, and up an incredible +$303.08 since the March 9, 2009 market bottom. GOOG is down -5.23% and -$32.80 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 73 consecutive trading days (since September 20). However, as noted, Google is now below $600 yet again. GOOG finished November down -9.45%, after impressive gains in October +16.72% and September +16.84%.

S&P 500 By comparison, the overall market, the S&P 500, was up +0.07% for the week, closed December up +6.53%, closed 2010 up +12.78%, and is up +85.90% since the March 9, 2009 market bottom. SPX closed at a 2010 and multi-year closing high of 1259.78 on Wednesday, December 29, 2010, the highest close since the September 8, 2008 close of 1267.79. GOOG has been outperforming the market since the March 9, 2009 market bottom, underperformed for 2010, outperformed in September and October, barely outperformed in December, but lagged the market in November. A review of the S&P 500 is here [S&P 500 Ekes Out a Weekly Gain to Close Year (Charts) *Up +12.78% for 2010*].

Google News and Fundamentals 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.


Google Slips Back Below $600

Google Daily Chart Below is the GOOG daily chart since October 15, they day after 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. Weekly and monthly charts are included lower on this page for a longer-term perspective.

Noteworthy Closing Prices
Current Close: $593.97
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. The very highest yellow line is the downtrend line discussed below *


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 has begun descending.

Resistance GOOG continues below 2010 closing high of 626.77 on November 8 so there are multiple levels of resistance above. Current resistance is the benchmark 600 price plus the 50 day simple moving average of 599.30. Next resistance is now the Wednesday, December 22 closing peak of 605.49. Above that, resistance would be the 607-608 area, related to the October 19 and 20 closes of 607.83 and 607.98, respectively.

Support 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.

Moving Averages GOOG has dropped back below the descending 50 day simple moving average, but remains above the the 20, 25, 100, and 200 day simple moving averages. The 20d is now ascending while the 25d sma has leveled off, yet both continue below the 50d. The 50d has begun to descend. The 100d is ascending strongly and the 200d is slightly 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.

Relative Strength Index (RSI) The RSI 14 day = 52.20 is reasonable, descending, 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 = 51.15 is reasonable and slightly 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 reasonable at YE 2010.

MACD (12,26,9) The MACD = +0.20 is descending and became positive on 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 GOOG traded a very low 1.5M on Friday, December 31, and volume has been very low through the holidays. The 20 day simple moving average of approximately 1.8M has leveled off. The high has been an incredible 14.8M shares on October 15, 2010 (day after Q3 earnings release), a multi-year high. By comparison, the 50 day sma is descending and approximately 2.4M. Buyer conviction and enthusiasm after the earnings report waned and as GOOG approached the 2010 YTD closing high of 626.75. Volume should increase in January 2011 as the calendar Q4 earnings report nears.

Long-Term Trend The 10 month exponential moving average of 537.28 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, November, and into December. GOOG had been mostly below this long term bear signal 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! GOOG had rallied with the market and actually outperformed the market during September and October - even before the excellent Q3 earnings announcement. 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 is $600, which GOOG has yet again dropped below. Will buyer confidence rally GOOG yet again above $600? We think so. More about Google the value of GOOG stock on the Google Stock Valuation page.


Google Weekly Chart

Below is the GOOG weekly chart since the November 24, 2008 cyclical closing low of 257.44. That was +131%, +$336.53, and 767 days ago. The yellow uptrend line is the same, and as described, on the daily chart above.



Google Monthly Chart

Below is the monthly GOOG chart since the March 2009 stock market cyclical low. 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.



Disclosure
We are long GOOG.


About Google

Wal-Mart moved into 5th largest market capitalization ($192.10B) this past week, ahead of Google. Google market capitalization is now 6th largest in the USA at $189.94B, behind #1 Exxon $368.71B and #2 Apple $295.89B. 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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