Google has been one of the leaders in both the 2002 – 2007 bull market and this current bull market off the 2009 lows. I’ve been bullish on Google along with the entire market for awhile, back in October of 2012 after Google reported disappointing earnings and the stock got hit I created this post LINK. Basically expressing that even though as of that day Google looked beaten up, it looked like a decent opportunity for investors. The price at that time was around $670 and about six months later Google was trading at $920.
So what should we be looking for in the near future. Well I am a big believer in Warren Buffets saying “When everyone is fearful, it’s time to be greedy. And when everyone is greedy, it’s time to be fearful.” For those that have followed this blog for awhile, you know I favor “fading” or taking the other side of overextended moves of both price and sentiment in either direction, at logical price points of course.
I bring this up because I believe it’s nearing the time to become cautious on Google. The topmost chart above shows weekly trading in Google on a log scale, all the way back to it’s IPO in 2004. I’ve also highlighted the last bull market of 2004-2007 which took the stock price up over $650 points. Now we equate an equal size bull market rally off the 2009 lows in the stock price and it yields around $900. Since Google has just last week traded above $920, that makes me cautious that this move may be getting overextended. It may be time to start taking some profits or tightening stops just in case. However I would still give this bull market the benefit of the doubt overall, especially being bullish on the broader market averages. But any trading below that up trend line would be a clear sign to me that the run up is over.
The bottom of the two charts is a daily chart showing the last 2 years of trading in Google stock price. The supply and demand pattern I see in this time frame in annotated on the chart. The first support area I see is around $840-$850. I believe there is a good chance once support is established for another (possibly final) rally up into $970-$980 and possibly a shot at the $1000 level before all is said and done.
I would be especially wary of any extreme optimism sentiment pushed by main stream media given the current structure of Google’s current trend. If we were to see a lot of “noise” by the main stream media whether by magazine covers or financial blogs and news channels, I would take that as a bearish sign for the future and a time to take profits. It’s most likely being used to cause the average Joe investor into chasing a stock while the pro’s are on the other side unloading it.