November 19th 2007
Google’s down! That means buy…Not!
Last week I saw an article saying Google’s down! That means buy!
Whatever your opinion of the internet giant, buying anything because it’s cheaper is not a good idea. I recognize that GOOG is a leader and their profit potential is huge, but that doesn’t matter to you unless the stock price goes up. Let’s look at the chart:
Is a bounce likely? Yes. Is it a good time to buy? Maybe for a short term trade.
GOOG opened and closed at almost the exact same price on Friday. Kind of remarkable for a stock with a 14 period ATR of 23! When the open, high, and close are identical it is called a Dragon Fly Doji. This is significant because GOOG is sitting on a major area of support, the 50 SMA. So I would bet that GOOG will bounce.
But there’s no long term setup present. Those that buy GOOG now will probably see some short term price appreciation. However, looking over the longer term, it’s difficult to say where GOOG is headed. Considering the direction of the indexes, trying to go long on GOOG may prove futile.
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3 Comments »
akalawoo (lawrence) on 20 Nov 2007 at 3:17 am #
Hmm … why bother about the direction of google. If you knew option, you can just strangle or straddle it to make tons of money no matter which direction google run. Only 2 things can failed this strategy. 1 is the IV and the other is when google do not move out of the break even point.
Anyway guessing google direction can be fatal
Jakob Dupont Knudsen on 20 Nov 2007 at 8:22 am #
I just looked at yahoo and it sure seems like you were right
So far, a small bounce. Let’s see how far it will go.
Jonathan on 20 Nov 2007 at 9:25 am #
@lawrence I agree with you on the option strategies and it’s something I’m looking into, but with trading and a blog, I’m running out of time
@jakob I expect GOOG will follow the market. Everything’s up today, but whether GOOG is a long term buy won’t be answered for some time.