Sunday, March 6, 2011

Google Struggles at $600 (Charts) *Below 100 day average* GOOG


350,000 Google Android devices are being activated daily worldwide

Google Overview

Google Inc. GOOG closed at $600.62 on Friday, March 4, 2011. Google was -1.54% for the week, is -2.08% for March, was +2.17% for February, was +1.08% for January, is +1.12% for 2011, and is up +106.48% since the March 9, 2009 market cyclical low. This equates to -$9.42 for the week, -$12.48 for March, +$6.65 for 2011, and up an incredible +$309.73 since the March 9, 2009 market bottom. GOOG is down -6.10% and -$39.01 from the 2011 and multi year closing high of $639.63 on January 18. This was the highest close since $653.82 on January 14, 2008. After struggling in the Bear Abyss below $500 earlier in 2010, GOOG has closed above $500 since September 20, 2010 and closed above $600 since January 3, 2011.

S&P 500 By comparison, the overall market, the S&P 500, at 1321.15, was +0.10% for the week, is -0.46% for March, was +3.20% for February, was +2.26% for January, and is +5.05% for 2011. SPX is +95.28% since the March 9, 2009 market cyclical low. SPX closed at a multi-year closing high of 1343.01 on Friday, February 18, 2011, the highest close since the June 17, 2008 close of 1350.93. GOOG has been outperforming the market since the March 9, 2009 market bottom, underperformed in 2010, and continues underperforming in 2011. A review of the S&P 500 is here [S&P 500 Ekes Out Weekly Gain Despite Libyan Revolution (Charts) *Below 20 day average*].

Google Fundamentals Google reported excellent calendar Q4 2010 financial results on Thursday, January 20, 2011. Google financial data, charts, and review is at the Google Financial Performance page, updated for the latest calendar Q4 2010 financial results. A review and analysis of the Q3 2010 earnings call is at the Google Earnings Conference Call page and will be updated soon for the Q4 2010 earnings call. Our updated valuation and target price for GOOG stock is posted at the Google Stock Valuation page. Revenues from outside of the United States were 52% of total revenues in the fourth quarter of 2010.

Google Product News During the week of March 4, malicious apps (58 at last count) were discovered on the Android Market and Google is presently responding with fixes and remote kill. Executive Chairman Eric Schmidt announced in February that 350,000 Android devices are being activated daily worldwide. Google announced One Pass on February 16 to counter the Apple announcement the previous day of an App Store subscription service. It does appear that Google is offering more favorable terms to publishers than Apple. 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 number - 300,000 Android activations - was reiterated by Jonathan Rosenberg, Senior Vice President of Product Management, during the Q4 2010 earnings call on January 20, 2011. This was after the negative news that the EU had launched an anti-trust investigation.

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 Daily Chart

Google Daily Chart Below is the GOOG daily chart since January 3, 2011 (all of 2011), the day Google closed above $600 and has continued to do so. 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: $600.62
2011 and Multi-Year High: January 18 $639.63
2011 Low: January 31 $600.36
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 25 day and 200 day simple moving averages and the uptrend line are not shown on the daily chart this week. *

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, generated a buy signal on Tuesday, January 11, after being in sell mode since December 14. However, it appears the 25d sma will cross below the 50d sma this next week. GOOG is tenuously in an intermediate-term bull market. That is, the 25d sma is now greater than the 50d sma. The relationship between these two moving averages is a lagging indicator. The 25d sma (not shown on the daily chart above) is descending and the 50d sma is ascending. GOOG is below both the 25d sma and the 50d sma.

Resistance GOOG is below the 100 day simple moving average (604.66), the 50d sma (612.91), and the 20d sma (614.92), all of which are current resistance. The 616 area is resistance. Higher short term resistance is the recent multi-year and 2011 closing high of 639.63 on January 18. Next higher is the intraday high of 642.96 on January 19. Above that are the technical resistance areas as a result of the ascent to and descent from the all-time closing high of 741.79 on November 6, 2007.

Support The key support currently being tested is the 600 benchmark price. Next support is in the 594-595 area and then the 590 area.

Moving Averages GOOG is now below the 20, 25, 50, and 100 day simple moving averages and only above the and 200d sma. The 20d, 25d, and 50d sma's are descending and the 100d and 200d sma's are ascending. Each continues above any longer term average but this will probably change in the next week as the 25d drops below the 50d sma. Next would be the 20d sma dropping below the 50d sma.

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 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 January 18, multi year and 2011 closing high of 639.63. GOOG had 2 failed attempts on January 19 and 21 to break through upside and has remained below since.

Relative Strength Index (RSI) The RSI 14 day = 33.42, down from last week's 49.16, is oversold, descending, the lowest since February 7 (33.15), and well below the recent high of 82.08 on February 18. This was the highest since December 23, 2010 (84.86). The recent peak has been 89.05 on December 20. The recent low was 17.01 on August 24, 2010 and the unbelievable low of 4.79 on July 6, 2010. A multi-year high, of 94.12 was reached on September 27, 2010. The RSI 28 day = 46.06, just below last week's 45.05, is reasonable, and descending. The 2010 and multi-year high was 87.87 on October 18. The 2010 lows were in the mid-20s. GOOG is oversold short-term and nearing oversold levels intermediate term.

MACD (12,26,9) The MACD = -2.21, well below last week's +1.72, and is descending. 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 a higher than average 3.0M on Friday, March 4, 2011. The multi-year high has been an incredible 14.8M shares on October 15, 2010 (the day after Q3 earnings release). The 20 day simple moving average of approximately 2.3M is ascending. By comparison, the level 50 day sma is approximately 2.4M.

Long-Term Trend The 10 month exponential moving average of 567.80 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 2010 and has stayed above since. GOOG had been mostly below from April to August in 2010.

Conclusion Bullish sentiment weakened again for Google this past week pulled GOOG down. GOOG has stayed above $600 (barely), which is a positive sign. Google tends to languish mid-quarter, between earnings reports, as investor interest wanes. Google reported excellent Q4 2010 financial results, record-setting, on Thursday, January 20 which are reviewed on the Google Financial Performance page  The announcement of a management restructure is reviewed earlier in this post and also here. We do not believe this is ultimately negative news. A review and analysis of the most recent Q4 2010 earnings call is at the Google Earnings Conference Call. The Great Google continues as an extraordinary cash flow machine! Google has set the bar high for the future and EPS growth. The intermediate-term trend turned bullish on January 11 and but this is now tenuous. The long-term trend continues bullish. The line in the sand continues to be $600, which GOOG has managed to stay above for all of 2011. Will buyer confidence maintain GOOG above $600? We think so based on just Google's fundamentals - however, a market downdraft may negate this. 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.

Disclosure We are long GOOG.

About Google

Google's market capitalization is 7th largest in the USA at $193.11B. This is behind #1 Exxon $421.88B, #2 Apple $331.66B, #3 Microsoft $218.06B, #4 General Electric $216.30B, and #5 Chevron $208.27B, and #6 International Business Machines $197.36B. Google is the 4th largest technology company in the USA by market capitalization behind Apple, Microsoft, and IBM. Current Google financial data is at the Google Financial Performance page. A review and analysis of the most recent Q4 2010 earnings call is at the Google Earnings Conference Call page. More about the value of GOOG stock on the Google Stock Valuation page. Headcount: On a worldwide basis, Google employed 24,400 full-time employees as of December 31, 2010, up from 23,331 full-time employees as of September 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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