Google: Upside Risk-Reward Much Improved

When in early-mid February the stock price of Google Inc (GOOG) went vertical and hit an all-time high just above the $800 mark, I raised my hand and discussed here ( that the stock is overdue for some price consolidation.  Now that the stock has consolidated and broken past recent resistance, it again looks to have enough momentum built up for another up-leg.

Technology as a sector is up 3.00% year to date as measured by the SPDR Technology etf (XLK), compared to the S&P 500 which thanks to the rally in recent days is again higher by almost 7.00%.  On the chart below the blue line represents technology, while orange is the S&P 500 etf (SPY).

Clearly Apple Inc (AAPL) has not helped the techology sector this year, but with just a little further help of the broader SPDR Technology etf (XLK) constituents, Google Inc (GOOG) could get a further boost by simple association of the technology sector.

In terms of the chart of Google Inc (GOOG), the consolidation phase I was looking for in mid February took the stock down just about 3.00% peak to trough, which was in in line with that of the S&P 500.  Just like any strongly-trending stock, Google Inc (GOOG) consolidated, which looked more like churning below resistance, just under the $800 mark before shooting higher to new year to date and thus new all-time highs.  Also much like stocks in strong trends, the momentum indicators such as the Stochastics oscillator barely came out of the overbought levels before moving higher again.

The divergence of Google Inc (GOOG) versus Apple Inc (AAPL) is apparent and most folks are aware of it.  Whether there is a fundamental call to be made here is not my general call, but trend followers that used to ride the Apple Inc (AAPL) train are likely now aboard the Google Inc (GOOG) rocket, which in the near-term could limit the draw-down in the stock..

In terms of an upside price target, strongly trending stocks have a tendency to reach towards big round numbers, as such I am seeing $850 as a next major upside target.






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