by Serge Berger | October 21, 2013 8:11 am
Tech giant Google (GOOG) reported its third-quarter earnings results after the close last Thursday, and a nice set of numbers resulted in a historic move for Google stock.
The company’s earnings per share came in at $10.74 — up by 19% and much better than analyst estimates of $10.36, thus beating by a good margin. Google also reported revenues up 5% to $14.89 billion, slightly better than the consensus.
As a result of the good earnings report, most research teams kept their positive ratings on the stock or even upgraded them. Bank of America and JPMorgan raised their price targets from just below/above $1,000 up to $1,100.
Investors loved all of the good news and blasted the stock higher to the tune of 13.8% on Friday that shot GOOG shares up above the $1,000. Not surprisingly, the move in Google stock came on massive volume of more than 11.5 billion shares, compared to an average daily volume of around 1.5 billion shares.
Click to Enlarge On the charts, GOOG thus staged a massive breakout that can be seen from a mile away.
On Oct. 10, I discussed that Google stock recently bumped into its 200-day simple moving average (red line) for the first time since November 2012, which in hindsight was exactly the small retracement that GOOG needed to power to fresh all-time highs. With Friday’s rally, Google stock broke out past its July resistance line, as well as out of its bull flag that has formed since June.
As I also pointed out, GOOG remained somewhat rangebound in the broader sense up to its earnings announcement, which is to say that it stayed in its consolidation period which began with the May highs.
From this perspective, the marginal higher highs in July were merely an overshooting within the confines of a medium-term, multimonth consolidation phase, all of which coiled up the stock and led to the big breakout from last Friday.
While that’s all good to know, traders and investors must now have a game plan on how to deal with Google stock after the breakout blast.
From a purely technical lens, the breakout is nothing but bullish — at least in the medium-term of three to six months. In the near-term, while Google stock still could squeeze somewhat higher in coming days, it most likely will need to settle into a consolidation phase.
Quicker traders might be able to pick off a few points here and there on both the long and short side in GOOG in coming weeks. Medium-term traders and investors would be better off waiting for the stock to consolidate in a tighter pattern and allow for emotions to settle before looking to buy again.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.
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