Google: Ripe for a Bounce

08/28/2013 7:00 am EST

Focus: STOCKS

Nicholas Vardy

Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

This is a tough time of the year to make trading recommendations, as volumes are low, the market has pulled back, and sentiment has soured, notes Nicholas Vardy in his trading service, Bull Market Alert.

That said, this is the best time to scour through the market for some oversold positions that are set to rebound sharply.

And few positions look more ripe for a bounce than a company whose headquarters I stayed right next to this weekend in Silicon Valley, Google (GOOG).

Google, of course, needs no introduction. With more than 300 million users around the world a day conducting searches, it is by far the most popular search engine on the planet.

Over 25 advertisers spend more than $150 million in advertising on Google each year.

And its bevy of unrelated projects—driverless cars, Google glasses, and the new Google Chromecast Internet TV device—position Google to dominate our lives for years to come. That's why I've called Google the GE of the 21st century.

From a trading perspective, as one member of my staff put it, Google today looks like “a gift from the trading Gods.” Looking at a wide range of technical measures, the stock is massively oversold and is due for a bounce.

If you happen to be a technical analysis buff, you can look at Fast stochastics, RSI, Bollinger Bands, support at both $850, and its 100-day moving average. The stock also is touching the lower trend line drawn on its one-year daily chart.

The bottom line? When you throw in an unwarranted negative mood swing of Mr. Market and a heckuva lot of other factors that have come together, Google appears due for a strong bounce.

So buy Google at market and place your initial stop at $800. If you want to play the options, buy the December $900 calls.

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