Has Google lost the love of Wall Street?
By analyzing Google’s chart it looks like it has.
The chart of Google is getting very close to being broken. Google topped in January 2010 and has been underperforming the market ever since. We saw a big push higher ahead of earnings back on April 13, 14, and 15. Earnings came out later in the day on the 15th and Google gapped lower. The action that day got even more bearish when the stock continued lower breaking below the 50 day moving average support level and to close at the lows of the day. This move lower stalled and 2 days later Google made a run to retake the 50 day MA as well as the downtrend line off the January and March highs. This attempt was in vain as it was met with heavy resistance right away sending Google lower by another 30 points. Google is now on the verge of completely breaking down.
Looking at the chart you can see Google broke its 200 day moving average finding no support at all at that level. Yesterday it tried to get back above that line but was quickly sent lower again. Here we are on April 28 with Google reversing off its lows on light volume to make 1 more run above old support.
Why is this important?
Stocks under institutional accumulation tend to find buyers near their 10 and 21 day moving averages but if not, they should definitely find the institutions adding to their positions at the 50 or 200 day moving averages. Other such buy zones include trend lines, Fibonacci levels or short term stretched levels such as volatility bands or other statistical measurements. We have not seen any institutional buying at these points and in fact see something far worse! We are seeing aggressive selling through these levels and once they bounce back up to these old support areas, Google is met with a wall of sellers and shorters. These old support areas are turning into new resistance levels. This is extremely bearish!
A break out of the downtrend line occurred just days prior to earnings. These moves tend to keep shorts honest or at least less aggressive. The fact that the break higher was followed by a heavy volume gap down after earnings shows us the bears are in charge and further selling may continue.
Is there any hope for Google to recover?
The good news is we do have old support at the Feb and March lows near $520 where we did see some bids. The question is, will it be enough to allow Google to pull its head back above that very important 200 day moving average level.
What do we need to see?
We need to start seeing institutional support at the $520 level giving GOOG enough of a push so it can get back above that 200 day moving average level of $535.
Google closing in the top of its trading range on Wednesday is a positive but the problem is it got pushed back below the 200 day MA.
What would signal another selloff for Google?
If we continue to see lower closes on heavy volume and light volume bounces into the 200 day moving average this should signal another leg lower. If this happens we should break the 520 level.
If we break this 520 level and consolidate just below those old support areas we would look to short Google as the chart will be broken.
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Disclosure: no positions