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A Bearish Flag For Google

06/09/06 08:01:18 AM
by Arthur Hill

Google found support near its 200-day moving average, but a bearish flag looms, and traders should watch key support closely.

Security:   GOOG
Position:   Hold

A number of patterns and indicators are active in Google (GOOG) at the present. The rising flag and 50-day moving average (MA) relate the medium term (Figure 1). The large triangle and 200-day MA relate to the long-term picture. Support is pretty much the same for both pictures, and a medium-term breakdown will have long-term implications.

FIGURE 1: GOOGLE. GOOG is showing various active patterns and indicators currently.
Graphic provided by: MetaStock.
On the medium-term picture, the stock formed a rising flag over the last few weeks and is meeting resistance from its 50-day moving average. As long as the flag is rising, the bulls get the benefit of the doubt and a move above 400 would signal an acceleration higher. A breakout should be accompanied with expanding volume to validate the move.

On the long-term picture, the stock is trading near the lower trendline of a large triangle and near the 200-day moving average. The triangle extends back to January 2006 and the 200-day moving average offered support in March. Well, the stock actually broke below the 200-day in March, but immediately consolidated and then surged back above with a gap a few weeks later.

Taking the medium-term and long-term picture together, support around 370 holds the key. A move below this level would break the lower triangle trendline and 200-day moving average. This would also affirm resistance from the 50-day moving average and confirm the bear flag. The downside target would be the October lows around 300.

Arthur Hill

Arthur Hill is currently editor of, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for and the main contributor to the ChartSchool.

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Date: 06/09/06Rank: 4Comment: 
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