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STOCHASTICS


Google Bounces Off Support

02/22/07 10:55:59 AM
by Arthur Hill

Google has been trading flat during the last few months, but support is holding and the recent upturn in stochastics argues for higher prices.

Security:   GOOG
Position:   Accumulate

I featured Google (GOOG) on October 3 as it was on the verge of a triangle breakout. This breakout occurred in mid-October 2006 and the stock surged above 500 in November (Figure 1). The stock moved into a trading range over the last few months with support at 450 and resistance at 515.

FIGURE 1: GOOGLE, WEEKLY. GOOG moved into a trading range over the last few months with support at 450 and resistance at 515.
Graphic provided by: Telechart 2007.
 
Support around 450 stems from broken resistance and the midpoint of the long white candlestick. This long white candlestick is a bit deceiving because there is actually a big gap on the daily chart from 425 to 453 and this gap also provides support (Figure 2). The December low solidified support at 450, and the Google bulls are in good shape as long as this level holds.

Turning to Figure 2, we can focus on the current trading range. The stock declined to support this month and the stochastic oscillator moved to oversold levels. The stochastic oscillator should be considered both oversold and bearish as long as it remains below 20 because stocks can become oversold and remain oversold.

FIGURE 2: GOOGLE, DAILY. GOOG declined to support and the stochastic oscillator moved to oversold levels in February.
Graphic provided by: Telechart 2007.
 
Google is not staying oversold, though, as the stochastic oscillator moved back above 20 this week and Google broke resistance at 475. This upturn reinforces support at 455 and calls for a challenge to the Novermber 2006–February 2007 highs. A move back below 20 in the stochastic oscillator would call for a reassessment of this bounce.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, 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 Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
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Address: Willem Geetsstraat 17
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E-mail address: arthurh@tdtrader.com

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Date: 02/22/07Rank: 4Comment: 
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