Google (GOOG) is in the thick of many of the technology indices and exchange-traded funds, and as it turns out, Google stock can actually benefit from a rise in those indices as much as it can contribute to them.
Take the PowerShares QQQ Trust (QQQ) for example, where as of Dec. 5, GOOG is the second-largest holding at 7.42% of the fund. Google stock is only behind Microsoft (MSFT), which makes up 8.11% of the ETF’s holdings. GOOG, which is up by roughly 50% year-to-date, has exhibited plenty of upside momentum in 2013, though it has slowed down along with the rest of the market during the past six weeks.
This is depicted on the below chart, which shows a big spike in the rate of change in Google stock after its earnings report in October. Following the report, GOOG’s incline has slowed in an effort to consolidate the gains. This is a healthy action, and hence one reason to look at Google stock for a trade into year’s end — and potentially beyond.
What’s more, the Nasdaq-100, as represented by the QQQ ETF, has outperformed the SPDR S&P 500 ETF (SPY) in recent weeks (see below chart), as it barely moved lower when the broader market corrected a little.
While this is no blind buy signal for Google stock, from a technical perspective it does show technology stocks coiling up in a relatively tighter consolidation base, which ultimately could result in a stronger bounce past resistance to fresh year-to-date highs.
In terms of the daily Google stock chart: While consolidating in the broader sense, GOOG has manged to bump its way higher in a stair-step approach following the October earnings release. In recent days, this has led to a tight consolidation phase that could lead Google stock to push higher in coming weeks.
My thought here isn’t that Google stock to massively outperform the broader market. However, I think it makes for a relatively easy and straightforward play on a likely year-end bounce that could last into early January.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
