As any pilot can attest, gaining altitude reduces airspeed. It requires more effort to climb than to maintain straight and level non-accelerated flight. Market realities are not that different from this principal of aerodynamics. In terms of avionics, Google (GOOG) is not a glider, which is dependent on an updraft to gain altitude. Google is more like an F18 Super Hornet that has the ability to climb at the aviator's discretion. I believe Google will advance on its own thrust.
Google has been declining for the last several months and I believe it has reached a key level of support. The decline should be over for the most part.
I have once again provided a block matrix, except this time I have highlighted two blocks - which were the only block trades of one million shares or greater to trade in this issue since 2008. I have indexed all of the blocks (except for the block in 2009) on the chart with white vertical lines. I highlighted the block of May 16 in red, because I suspect it was a short by the Designated Market Maker or another insider.
These one million share trades indicate that a significant merchandising stance has been established in this issue. Not because they are so large in overall value, but because they are so rare. In addition, the price consequences have been profound considering the histrionics. For instance, subsequent to the September 17, 2009 block, Google advance over one hundred and fifty points in three-and-a-half months. That is over a 30 percent increase in a very short window of time. This is analogous to a 747 climbing like a supersonic fighter plane or a supertanker maneuvering like a speedboat.
While everyone is watching Apple (AAPL), Europe, gold, currencies, treasuries, the Federal Reserve and the man in the moon, Google will quietly be advanced by the Designated Market Maker without much fanfare. Once Google approaches the levels where the Designated Market Maker wishes to distribute his shares, the media buzz will be like a sonic boom. They will draw attention to Google, while prompting investors to get in while they still can. Do not be surprised if you hear someone whisper: "Blue Horseshoe loves Google."
After the top of the market merchandising is complete, the wholesale and retail levels will adjust accordingly. Google will come back to earth and the process will be repeated. It is a cycle. It is repetitive in nature and you need to understand whether it is accumulation or distribution taking place. I have found that the most difficult part is correctly assessing the wholesale and retail levels of an issue, because it is a moving target.
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On the Basis of the foregoing these are my views and observations:
The Trade
I recommend establishing a long position in Google. Open your position with only one-fourth of whatever capital you intend to commit to Google at $560.00. Purchase the remaining three-fourth of the position at $515.20 and stop out at $494.17. Do not post your stop out. I have said it before, but it is so important that at the risk of being redundant and in an abundance of caution I will say it again. It is too easy for the Designated Market Maker to cash investors out by moving the price above or below your stop out and move the price right back down or up again.
In addition, when a stop out is triggered, it converts into a market order and that could be disastrous if the Designated Market Maker decides to really take advantage. Remember the "Flash Crash"? I would be looking to exit the trade at an upside price target of $628.52. Do not allow this position to exceed 5% of your overall portfolio. You could also write some near close to expiration calls in the hopes of having the stock called away. If it is called away, then the premium will add to the overall profit of the trade and if not then the premium is money in your pocket.
There is always the possibility that the trade may not work out.
There Is Never A Sure Thing (particularly on a short)
Investors must realize and recognize that there is never a sure thing. Sometimes events that have a low probability of occurring bring forth very serious consequences should they come into being. Investors must judiciously consider what the inherent practical limits are and how much they stand to gain in relation to the risks involved in establishing any position.
In addition, persistence can become desperate folly by allowing a losing position to become a viable argument for deciding on a new position. Rather, such decisions should be based on the current and soon-to-be circumstances.
Any position in which one unexpected factor has a significant impact on your portfolio is the result of poor planning. It is a fault most commonly associated with people who want to explain away their losses. SUN TZU -Art of War "Use an attack to exploit a victory, never use an attack to rescue a defeat."
If you follow the process recommended and the trade does not work, the overall loss in this model is $3,000.00. That amounts to .003 of the overall portfolio (theoretically valued at $1,000,000).
And finally, never be a brave and brainless investor because a fool and his money are soon parted.
A portfolio of $1,000,000 should position size in the following manner.
This is a trade, not an investment. Be ever vigilant.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GOOG over the next 72 hours.
