Search engine giant Google (NASDAQ:GOOG), while outperforming the broader U.S. stock market year-to-date, has diverged from the broader indices since the beginning of March. On March 5, I said the stock was ready to move higher still into the $850 area. Since then, we got within $5 of said target and started a consolidation phase.
For a little perspective, let’s take a step back and look at the past nine months or so on the chart below.
After breaking a major line of resistance in August 2012, the stock shot up sharply only to retest the same line again in November. The stock then hit a tradable low, and on the daily charts formed a major bullish hammer candle on Nov. 16 — the same day that the S&P 500 bottomed. From there, GOOG more or less pumped steadily higher in a nice uptrending channel. Even when the stock briefly corrected in mid-January, it quickly bounced back into the channel. From the November lows up to the most highs on March 6, the stock rallied just about 32%.
When I scribed my vibes on Google in early March, the stock had started a new breakout after a consolidation phase, thus leading me to see the stock higher. At its current juncture, GOOG looks much less bullish and in fact looks on the heavier side.
No, I am not seeing a major demise of the stock — in fact, longer-term there are no significant headwinds from a chart analysis perspective that I see. In the intermediate-term, however, the recent trickling-down off the highs is now pinning the stock right at its uptrend dating back to November 2012. Thus, those looking to buy the stock will most likely find better opportunities lower.
How much lower? The 50-day simple moving average around the $780 mark might offer first support. Better support, however, would be in the $740-$750 area, which also serves as the midway point, or the 50% retracement of the rally off the November lows.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.