In mid-February, when the stock price of Google (NASDAQ:GOOG) went vertical and hit an all-time high just above the $800 mark, I raised my hand and said the stock is overdue for some price consolidation. Now that Google has consolidated and broken past recent resistance, it again looks to have enough momentum built up for another up-leg.
Technology as a sector is up 3% year-to-date as measured by the Technology SPDR (NYSE:XLK) vs. almost 7% gains for the S&P 500. On the chart below, the blue line represents technology, while orange is the SPDR S&P 500 ETF (NYSE:SPY).
Apple (NASDAQ:AAPL) clearly has not helped the technology sector this year, but with just a little further help of the broader XLK constituents, Google could get a further boost by simple association with other tech stocks.
In terms of the chart of Google, the consolidation phase I was looking for in mid-February took the stock down just about 3% peak to trough, which was in in line with that of the S&P 500. Just like any strongly trending stock, GOOG consolidated — which looked more like churning below resistance — just under the $800 mark before shooting higher to new year-to-date and all-time highs. Also much like other stocks in strong trends, momentum indicators such as the stochastics oscillator barely came out of overbought levels before moving higher again.
The divergence of Google and Apple is apparent, and most folks are aware of it. Whether there is a fundamental call to be made here is not my general call, but trend followers that used to ride the AAPL train are likely now aboard the GOOG rocket, which in the near-term could limit the drawdown in the stock.
In terms of an upside price target, strongly trending stocks have a tendency to reach toward big, round numbers. As such, I am seeing $850 as a next major upside target.