Earlier today Google Inc (GOOG) hit a new all-time high and because the most recent ascent in price mimicked that of a solid double diamond ski slope, let’s review where we are and where the stock may go in the near future.
Like most stocks, Google Inc (GOOG) rallied strongly off the late 2008/early 2009 bottom and in the bigger picture never looked back. After trading in a narrowing range, the stock finally broke past a multi-year resistance line in August 2012. In November the stock re-visited the breakout level, which then launched it to its most recent rally. As such, technically the stock has behaved well.
Looked at a different way, note the steady retracements which the stock took over the course of this multi-year rally. The stock has a high propensity to find support between its 50% and 61.80% Fibonacci retracements of any swings. In other words, whenever the next pullback in the stock price occurs, look for the 50% or 61.8% retracement of the swing in question to hold as potential first support.
Google Inc (GOOG) has also been a relative outperformer in recent months versus the technology sector as measured by the Technology SPDR etf (XLK), which counts Google Inc (GOOG) as its second largest holding (7.33%), right after Apple Inc (AAPL) (14.78%). From a technical point of view this may mean that some mean-reversion could be due in the not too distant future.
Also according to the stock’s current distance from its 200 day simple moving average, it may be extended and due for a pullback. Looking back to 2010, when the stock moves around 20% past this moving average in either direction, it most often mean-reverts back to the moving average. Currently Google Inc (GOOG) is just about 20% past its 200 day simple moving average, and should the stock mean-revert back, it could hit roughly the $680 mark. Certainly there have been times when Google Inc (GOOG) was much further extended beyond its 200 day simple moving average, but for a near-term analysis and some context the 20% mark serves its purpose.
From a momentum perspective the stock is overbought but given the strong up-trend momentum oscillators are better used when they flash either positive or negative divergence versus price, which currently isnt the case in Google Inc (GOOG).
The fact that Google Inc (GOOG) may be coming to a pause here near the $800 mark (plus/minus a few $) shouldn’t be surprising. Big round numbers offer simple risk levels that both the retail and the institutional crowd in one way or another find attractive.
All in all Google Inc (GOOG) had a great run off the November 16th 2012 lows, which I might add coincided with the lows in the S&P 500. As it’s not my style to chase stocks higher, or lower for that matter, I would prefer some backing and filling in the stock for the time being before a better risk/reward may set up again on the long side.