In my last musing about Internet giant Google (GOOG) on May 21, I went over the near-term overbought conditions of the stock and said it would likely have to either consolidate in price or time (sideways movement) for some time before standing better odds of moving higher again. GOOG has since pulled back and, along with the broader market, flashed a bullish reversal last week, which is something I am taking note of.
As a quick reminder from the multiyear chart below, Google still looks like it holds further upside, yet the slope of the rally off the November 2012 lows remains somewhat steep. Through this lens, I sense that Google will at some point have to correct back toward the $800 area, but likely not just yet.
From January 2010 until August 2012, the stock continually found resistance in an area ranging roughly from $630-$670, making the resulting breakout important from this longer-term perspective, and making it unlikely that GOOG will break below $670 anytime soon.
On the longer-term chart, also note that the stock has during the past few weeks pulled back from the upper end of the uptrending channel, which somewhat subdued the immediate-term overbought conditions.
Back on March 21, GOOG was trading some 17% above its 200-day simple moving average. After the stock’s recent pullback, it now only trades around 14% above this moving average, and at last week’s lows traded 10.5% above it.
Given that Google trades in fairly close correlation to the broader market, it wasn’t surprising to see the stock finding a tradable bottom June 6. At the time, Google had retraced exactly 38.2% — an important Fibonacci support area — which also was fairly close to the stock’s 50-day SMA. After leaving a bullish hammer candle Thursday, traders with a close eye on the tape noted the opportunity for a long-side try.
Now, two trading days later, the stock is at minor resistance. But from a swing trading perspective, GOOG looks to at least have room up to the mid-May highs and beyond there to $940.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.