Google GOOG Dips Beneath $300

Nov 13, 2008: 10:53 AM CST

That’s a headline I never anticipated writing:  “Google closed beneath $300 yesterday for the first time since August 2005.”  The 2008 bear market has seized another casualty in high-flying Google stock, pulling it off 60% from its $750 price high in late 2007.  Let’s take a look:

Google (GOOG) Daily Chart:

Price is on a clear and present downtrend both on the daily and weekly charts.  In the case of the daily, the 20 and 50 period EMAs are serving as consistent resistance too difficult for buyers to overcome.  Also, any pullback to these key averages did little more than set-up a low-risk, high reward short-sell entry in the direction of the stronger down-trend.

Price is now making a new 2008 (and 3-year) low… but momentum does not appear to be confirming this new price low.  This is interesting, as it may set-up a divergence retracement trade (targeting the 20 period EMA or beyond) soon.

Should there be a bullish candle, an upside target would be established near $330 to $340 per share which would represent a counter-trend retracement trade back to EMA resistance if indeed the divergence forms and plays out as expected.

Keep in mind that divergence style trades are counter-trend in nature and are slightly more ‘risky’ than outright retracement entries into a prevailing trend so I wouldn’t fault you for waiting to establish a short-sell trade should the retracement occur.

Volume has been surging higher as price continues to make new lows, which on the surface signifies “confirmation” of the lower prices but also walks a fine line between “capitulation selling” so use caution before becoming overly bullish or bearish.

Also, do not play the “Well, it can’t go down much farther” game because the market has recently punished that mentality on virtually all fronts – from individual stocks to ETFs to gold to crude oil and other commodities.

Play it safe and realize that we’re participating in a very difficult environment at the moment virtually across the board.

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