Pattern Analysis
We’ve been involved with Google (GOOGL) since early this year as one of our Long-Term Strategy positions. If we look at things in the charts such as weekly and monthly perspective, I think Google has a good potential/probability of making a good move here with certain criteria.
One thing we have to learn regarding the “break out” is, that when it breaks out it doesn’t always just go straight up, but it will pullback to keep both the buyers and sellers in check. Sellers will say “a bull trap” and the buyers will say “a pullback before going even higher”.
Who is right? No one knows for sure, but the probability suggests that as long as we are in the primary-term uptrend, the buyers have higher chance of being right as you can see in the charts below.
This weekly-chart is studying the price-action of the patterns of the break-out, pullback, and continuation since 2006; and as you can see, after it breaks above the resistance-level (red box), it pulls back to retest old-resistance (red arrows) as new-support (green arrows) before a resuming to its uptrend. Back in July, after ER, Google broke out above the resistance-level, and with recent shake out in the market, Google has pulled back down to that old resistance level.
So the question, will it hold, and continue higher..
[Weekly Chart]
Oscillator Analysis
Below chart is actually quite fascinating to me. We have the monthly 20-SMA (see arrows) holding as strong support since 2010 without fail; even recently this year it acted as very strong support as you can see in the monthly-chart below. The oscillator also giving us the potential “buy signal” (see red square box).
I think the oscillator-signal alone wouldn’t bring much attention to me, but with the monthly 20-SMA acting as support and the oscillator’s indication, it caught my eye, and not to mention the things we’ve talked about so far on this article.
Monthly 20-SMA is expressing the current sentiment of this uptrend since 2009.
[Monthly Chart]
Candle Analysis
These candle patterns are called, “Bullish Pennant” pattern. It occurs in an uptrend, and essentially it’s just an “resting” pattern before thrusting or continuing higher. Like any other patterns in the market, these patterns can fail as nothing is guaranteed in the market, but it has high probability ratio of playing out as long as the overall market is healthy–so it’s very important to gauge NASDAQ Composite Index sentiment to ascertain Google’s direction. Looking at things historically though; 2006, 2012, 2013 bull pennant’s (see the annotations below) played out very well as you can see in the below chart.
If we can break out of this pattern, I think Google is a $800 stock.
We are looking to add more to our current holding as we are waiting on our setup to confirm on the daily-chart. ER is coming up in about 2-weeks, so the result of ER could contribute a lot on the current sentiment of this company.
[Monthly Chart]
