Google Clinging to Major Support Level
After a stellar year in 2013, gaining 58 percent at its peak ($1,121), Google Inc (NASDAQ: GOOG) shares are showing some signs of weakness.
Since catapulting over 220 points after its latest earnings release, GOOG has found more than one willing seller at the $1,120 level. Over four consecutive trading sessions the issue peaked between $1,119 and $1,121. Obviously a major institution or two, or perhaps a large investor has decided they want out at $1,120.
Instead of placing a large order at that level, the seller(s), allowing High Frequency and opportunistic day traders to trade in front of it, they have targeted in and around the level to exit their long or initiate shorts.
By attempting to discreetly exit on the way up, instead of scrambling to exit on an earnings disappointment or unanticipated downgrade by the “Street”, traders have put in place a key technical level.
With the company expected to announce earnings during the fourth week of January, one thing is known for sure: there is going to be at least 50 point after-hours and/or premarket move.
For example, after its October 17th earnings release, GOOG gapped up nearly 100 points and then continued higher during the regular session, adding an astounding 122.62 points.
At that time, GOOG was trading hands some 20 points off its all time high of $905.99. Now with its earnings release only a few weeks away, the issue is trading 14 points from its all-time high.
As well defined is the resistance in the issue, so is key support. During the last three trading sessions, GOOG has bottomed between $1,105.27 and $1,108.26, In addition , the issue made three consecutive lows in the same area December 23, 24 and 26.
So with the issue bearing down on this area for a grand total of six times in the last eight trading sessions, one must begin to wonder how long the bulls can defend this level. In addition, investors may begin to hit the panic button if the solely psychological support $1,100 level is breached.
Beneath that level, there may not be any major support until the $1,060 level, at which there are a series of lows in mid December. Also, if earnings come in under the Street's expectations, GOOG could very well do the reverse 120 point move on the downside.
Keep in mind, accelerated moves to the upside are pale in comparison to counter moves on the downside. For example, Tesla Motors Inc. (NASDAQ: TLSA) took three months to climb from $116 to $194, but relinquished a majority of the move in just ten trading sessions.
It is hard to argue that the GOOG chart is developing a bearish pattern. However, if the issue continues to languish in the 1105-1110 area and does not make a move to new highs, technicians may begin to ponder whether or not a head and shoulder top is on the horizon.
Whether or not that pattern comes to fruition, its next earnings release may determine the direction of the its next 200 point move.
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