Saturday, February 17, 2007

GOOG: Timing Is Everything

Timing is everything not only in life but in the market as well. When we look at a chart there is not only a price axis but there is a time axis which most people seem to ignore. I think time is more important than price but that's a topic for a future post.

Above we have a weekly chart of GOOG. Google has only been around 2 1/2 years so with such limited data it's hard to find any repetitive patterns especially on weekly charts. However, I have noticed a cycle in Google that appears to be very accurate.

If you look at all the major buy points in GOOG since this stock began trading, you will notice that they all took place EXACTLY six months apart. Those vertical green lines you see on the chart are all six months apart. Notice how GOOG puts in a bottom at these points in time followed by a rather nice rally.

The next 6 month cyclical low for this stock is due towards the end of this month. Here is what I am looking for. I'd like to see GOOG move lower below 450 maybe even testing the trend line in the next 1 to 3 weeks. That should take the stochastic oscillator below the buy line where previous buy points have developed. After that I'd like to see GOOG make a 3 or 4 week high which is where I will buy this stock. My rules are very clear and straight forward. If GOOG does not do what I just mentioned, I will not initiate a trade. If GOOG rallies from now into the end of the month, I will do nothing. I need this stock to sell off for me to be a buyer. Anyway, that's my plan and I'm sharing it with you ahead of time so that if you want to watch this trade develop, you can.


Tom said...

Looking for 425-430 as buy in.
As per your essay ,if does not hit.
Will watch.

miamirenter said...

i agree largely..however, i will take broader market strength into consideration..and trend may reverse in next 6 months

chiu said...

GOOG has a strange stock price movement behaviour. Right after the yahoo earning announcement, the stock goes almost all time high. With very good earning result, the stock price lost 8% despite of the facts that the broader market moved higher. Now it is almost a double top formation.

Your observation is very interesting, what strategy could you put on ?

Kevin said...

Hi Chiu,

GOOG has been weaker than the market. If the trade unfolds as described in my post, I'd buy the stock or buy call options that have a 6 month expiration date if the premiums are cheap enough. Most likely I'll just buy the stock.

Deborah said...

I would not want to take a change and own Google through the next earnings report. The earning "growth" should be down considerably and this stock is priced based on growth.

Maybe the stock going down has something to do with the enormous insider selling. That Eric guy sold $33,068,364.95 last month alone. Don't quote me, but I seem to remember seeing that insiders sold off about $2.5 billion in the last year or two.

nastar said...

Kevin, I recieved different results when I put the GOOG chart on sc and added the trend line. Maybe this link will work for annotated chart. If so, can you explain the diff. Love the blog. Great work.

acceltrader said...


Whatsd your take on RIMM? Overdone? Are you still long?


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