Google Channel Check

By | March 29, 2015

A reader requested I take a look at the Google (GOOGL) charts:

Google rallied off its 2012 low making a series of higher highs and higher lows for the next two years. The pullback to the 200 day moving average in April 2014 looked like a normal reversion, but the inability of the stock to move off the average or make a new high saw momentum wane, and it faded back below the 200 day, eventually breaking the uptrend line that marked the rally. Shares have since moved in a shallow angle channel, bouncing off the channel bottom and the 38% retracement level of the two year rally earlier this year, and returning near channel resistance last month.

3329.googl weeklychart

3329.googl daily chart

The daily chart shows the early 2015 test of channel support as an inverse head and shoulders bottom, with neckline resistance the 38% retracement level of the 2014 range. The stock price moved back up near the channel top and has since consolidated above an area delineated by the 200 day average and the 50% retracement level. On Monday a large bullish white candle formed on the chart and it was followed by a large dark bearish engulfing candle. This is called a two-day reversal or a tweezer and is considered a bearish reversal pattern, and price moved back below the 200 day average to just above the 50% retracement line.Chaikin Money Flow has crossed below its centerline, reflecting distribution over the last 20 periods, and the price momentum indicators are tracking lower.

It looks like the stock wants to continue the pattern that defines the channel, which would require a lower low and a new low for the year. That would be the logical inference, and as we all know stocks always act logically.

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