Earnings, Project Glass and the Google Pullback

Shares of Google (NASDAQ: GOOG) have closed lower for four consecutive sessions and are short-term oversold with earnings only days away.

Down four trading days in a row – and six out of the last seven – shares of Google are at their most oversold levels in a month. In fact, the last time GOOG was as oversold as it is heading into Tuesday, the stock rallied from a similarly volatile pullback (the stock then closed lower for four out of six sessions, including two in oversold territory), to gain over five and a half percent over the next six days.

With most of the attention the current lord and master of the technology world, Apple (NASDAQ: AAPL), discussion about Google has been relegated largely to mockery of the company’s effort to make smartphones near obselete (Project Glass and Google’s augmented reality glasses), and continued rumors that Google will be abandoning Android. This has understandably led to less enthusiasm for the stock.

And in a world in which Apple continues to deliver actual, top-selling products every few quarters, you don’t need to be the biggest doubter in the world to fear that Project Glass will disappoint at best – and turn into “vaporware” at worst – and that the company has yet to fully leverage its presence in what none less than Jim Cramer has asserted to be the Essential Spaces for any successful 21st century technology company: cloud, mobile, social.

Fundamentals aside, traders and more active investors should know that the stock is already trading at levels where buyers have tended to find value in the past. Before the early March pullback mentioned earlier, similarly oversold conditions in both early and late January also led buyers back to GOOG after aggressive selling had sent shares “too far, too fast” to the downside. Corrections in late 2011, in both November and October, produced the same short-term strength in the wake of short-term weakness.

Heading into trading on Tuesday, Google shares have a positive edge in the short-term of more than three-quarters of a percent, and have earned a one-point ratings upgrade to 7 out of 10, one point below our “consider buying” category. Should sellers remain doubters heading into the company’s scheduled earnings announcement on Thursday, then the opportunity to take advantage of what would then be exceptionally oversold conditions in Google may be an opportunity worth waiting for.

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David Penn is Editor in Chief of TradingMarkets.com