Shares of Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) rallied after the late-January earnings report but have been consolidating those one-day gains ever since. Google stock still looks constructive in the bigger picture, though, and the near-term posture increasingly looks to want to spring the stock higher.
When Google reported fourth-quarter results, it missed analyst estimates on both the top and bottom lines, but both numbers still came in higher on a year-over-year basis. After GOOGL saw some significant gyrations in its initial reaction, when trading resumed the following day (Jan. 30), investors were quick to push the stock up 5% on the day.
If we look at this purely through the lens of investor psychology, when a stock can miss on both its top and bottom line and still rally significantly (as a result of optimism about forward guidance), it’s a good sign of underlying strength.
Elsewhere, shares of Apple Inc. (NASDAQ:AAPL) this week pushed to fresh all-time highs, making Apple the first company ever with a $700 billion market capitalization. This had the effect of lifting the entire technology space somewhat — particularly the indices and ETFs where AAPL stock is a large component.
From a money-flow perspective, this now should prompt us to ask whether other large technology stocks, such as GOOGL, might be ready to push higher next.
Google Stock Charts
Looking at the multiyear weekly chart of GOOGL, we see that the price action from this perspective since October 2013, while in a wide range, has largely been one of consolidation. Google stock’s big breakaway gap higher from October 2013 remains the most bullish action GOOGL is holding itself up on, and thus the past 18 months or so of price action have essentially consolidated this move.
As I often say, consolidation can either occur in price (lower) or in time (sideways), and from this multiyear view, Google stock has mostly consolidated in time. Right now, that’s taking place in a larger bull flag type of pattern (black parallels).
From the above longer-term chart, we see that the October 2013 up-gap is pivotal in nature, and as long as it can hold its ground, GOOGL remains constructively positioned in the intermediate term.
Zooming in on the daily chart, we see that prior to the latest earnings report, Google stock bottomed, and the Jan. 30 post-earnings rally confirmed a higher low versus the early January lows. GOOGL continues to push up against a lateral resistance line around the $540-$543 area, a break above which would then quickly target the 200-day simple moving average (red line), which Google stock has not traded above since last October. This is a good reference point for the stock.
Active investors could now approach Google stock tactically by trying a buy on a push above the $540-$543 area, then see how the stock reacts near the 200-day MA. Chances are, if GOOGL can accelerate higher past this initial hurdle, then the 200-day also shouldn’t be too much of an object to overcome and the $580-$590 area would be reachable in the intermediate term.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.