GOOG could be setting up for a major move
Google
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PowerRating) has had
a rough week by its standards. After starting things with a bang on Monday
morning, the stock has put together three days in a row where the highs of the
day were seen by 11:00 AM. In fact, the sessions on Monday and Wednesday each
had the elements of key reversal days–with GOOG experiencing some fairly heavy a
selloffs from solidly positive to solidly negative territory.
Also note that eBay
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PowerRating)
and Yahoo!
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PowerRating) have shown bearish
tendencies this week and will likely follow GOOG fairly closely on Thursday and
Friday.
Let’s take a look at the 5-day chart of GOOG to get a better
feel for how things may progress the rest of this week:
Notice how since Monday around noon, GOOG has had several
periods of high-volume selloffs along with a series of lower highs. On the
positive side, GOOG has recovered nicely from the extremely sharp selloffs, each
time bouncing and settling above 424.00, which looks like an extremely important
support level for GOOG in the short term.
This type of descending triangle formation is not an indicator
of future movement in one direction or the other like a head and shoulders
reversal pattern or a pennant formation might be. Instead, traders should use
this formation as a warning flag that something bad might happen with the stock
and prepare to take advantage of it if it does.
The key to day trading Google on Thursday and Friday is going
to be found in the responsiveness that GOOG has to the 424.00 support level and
the downward sloping line connecting its lower highs. If GOOG breaks 424 support
and stays under that level for more than 30 minutes, you’ve got a potential
breakdown in the making and a great opportunity for short selling profits. In
the DaytradeTeam Live Trading Room, we will also be watching for opportunities
to sell short as GOOG approaches the top line of the triangle, with a tight,
angled stop loss that gets us out of the position in the event that GOOG puts in
a new higher high and breaks the formation.
I want you to watch me trade, learn my strategies and get my
alerts in real time through our Live Trade Room during your one week trial
membership. You’ll never trade the same again!
Andy Swan
Andy Swan created and
co-founded DaytradeTeam five years ago on a principle of empowering
individual stock and options traders with the techniques and analysis methods
typically reserved for elite professionals. His expertise in technical analysis
and commitment to educating members earned DaytradeTeam a top-ranking among
advisory services for several years.