| sym | chan | adx | traj | psar |
|---|---|---|---|---|
| GOOG |
The problem with GOOG is that it is too good for beardom, with return on equity of 20.7% and debt equal to around 10% of equity. This is what a growth stock looks like. So even if the near-term and longer-term technical trends are aligned, even if the price is showing a series of lower highs and lower lows, everything about GOOG's financials screams: Don't do the bear walk.
| sym | bday | blevel | stop | 2-day? |
|---|---|---|---|---|
| GOOG | mar7 | $587.67 | $605.30 | ✔ |
GOOG hit a swing high on Jan. 19 and since then has traced a fall-retracement-fall pattern, with smaller zig-zags contained within each leg.
The most recent leg down began on Feb. 18, and a one-day retracement on March 3 kicked off the immediate decline. The stock is now trading at levels last seen in November and December, which mark a region of resistance down to $578.20, with a swing low on Nov. 30.
Reversal Levels
- $642.96, +7.9% (jan. swing high)
- $631.18, +5.9% (feb. swing high)
- $611.49, +2.6% (march swing high)
- $596.00 --- You are here.
- $578.20, -3.0% (lower resistance range)
- $553.31, -7.2% (nov. swing low)
- $546.53, -8.3% (200-day moving average)
Bottom line: I'm reluctant to open a bear position on GOOG, not only because it has such stellar financials, but also because of the dense resistance at the present price level and the weakness of the trend, as measured by the average directional index.
And although I'm not usually a fan of story stocks, in the case of Google, I'm just reluctant to bet against this company. They're smart. They're innovative. They're big enough to exercise huge control over their competitive environment. The risks, to my eyes, seem to overwhelm the potential rewards.
Key
- chan: Channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
- adx: Average direction index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 30 and up but below 40, magenta (light purple) for 20 and up but below 30, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, purple for sunset on the horizon and brown for the earth.)
- traj: Trajectory of the ADX, green for strengthening, red for weakening or yellow for unchanging. Note that if the adx column is orange and the trajectory column is red, then the position must be closed.
- psar: The parabolic sar, either green for bullish or red for bearish.
- bday: Breakout day, the day the price broke through the upper or lower 55-day price line.
- blevel: Breakout level, the price level of the line that was broken through.
- stop: The current stop/loss price. Early in a bull or bear phase, this will be 5¢ below the low or above the high, respectively, on breakout day.
- 2-day?: Marked with an "✔" if the two-day rule is in effect. Under the rule, if the price closes below the breakout level on each of the two days following breakout day, then the position must be exited.
About channel analysis
Read a detailed explanation of my channel analysis method, including trading rules.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
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