Key Levels to Watch for Google

10/16/2013 7:00 am EST

Focus: STOCKS

Corey Rosenbloom

Founder and President, Afraid to Trade

Google has been in consolidation mode since early May, and technician Corey Rosenbloom of AfraidToTrade.com analyzes what the price action could be saying now.

In our prior update for Google (GOOG), we noted the end of August key support level, which was an effective and tradable support level.

Let’s update the chart and note the lengthy sideways trading range (rectangle) in the context of the weekly planning levels.


Here’s the sideways rectangle trading range at work currently:

chart
Click to Enlarge

The sideways consolidation or “rectangle range” pattern actually has a $10 range for the upper and lower trendline boundaries as drawn.

The lower support boundary extends from $845 to $855 per share while the upper resistance boundary similarly contains a $10 range from $910 to $920.

It’s more important to pay attention to the broader range from the $850 to $910 level, which has contained the “bounces” or ping-pong range-bound price action in Google.

Traders who enjoy playing “fade” or reversal strategies can continue playing movements toward or away from these visual trendlines.

However, breakout traders will need to continue to hold Google on a watch list until we see a confirmed breakout below the critical support level $840 or above the $930 high.

Specifically, focus your attention on the $840 per share critical support confluence. A failure or breakdown here not only would break shares out of the rectangle pattern, but also break price under the rising 200-day SMA.


Here’s the structure and planning levels on the weekly chart:

chart
Click to Enlarge

In the broader picture, Google reversed into an uptrend in late 2011 (with the bottom just under $500 per share) and broke a similar sideways trading range (between $550 and $650) in late 2012 for a week-over-week breakout event on rising volume (a great educational example).

From there, Google has retraced three times, and this third (current) retracement has devolved (or consolidated) into a sideways trading range best seen on the daily chart.

Note how the lower price trendline boundary stretches back to the early 2013 price high.

We also note a visual momentum and volume divergence, which serves as a caution signal, again drawing our focus on any future breakdown under the $840 level.

If so, look for a play toward the rising 50-week EMA into $825, which would be through “open air” on the daily chart (no known or obvious support level).

Continue monitoring the price action within the trading range and any future breakout that may occur.

By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com

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