Google Plays the Fibonacci Card with Measured Move

Nov 26, 2007: 8:16 PM CST

Perhaps it’s more of an esoteric thing when a stock plays to the exact tune of the expected Fibonacci Retracement, but these instances are absolutely worth mention.

Today, Google found daily resistance right at the daily 61.2% retracement (of the recent down-swing) and found support (closed) right at the 38.2% retracement. Both levels halted (contained) intraday price movement.

It may help to draw your own Fibonacci grids if you find my chart hard to read:

goognov261.jpg

I began the initial ‘downswing at approximately $740, the most recent swing high and drew the lines to $620, the most recent swing low to see how far of the downswing may have been retraced with this most recent price swing up.

For fun, here’s a look at Google’s intraday action:

goognov26i.jpg

Of educational note, notice the triangle consolidation that took place and was resolved forcefully to the downside.

Also, notice the rising trendline that was penetrated around 1:00 EST where price encountered a ‘throwback’ pattern following a break. Such ‘throwbacks’ are often opportune chances to establish an extremely high probability position (in this case, short) and play for a larger target. The measuring rule (which I have drawn in light blue) would have us project a downside break of the triangle to last about $7, which the break (measured move down) did.

Of course, price became noticeably weaker in the final hour of trading, but my guess is that no technical indicators could have forecast how severe the decline would be. The highest probability trade would have been to enter at the throwback to the triangle and then play for the measured move (which was achieved instantly).

On a side note, did anyone else find it odd that Google (GOOG) closed exactly at $666.00 today? Perhaps there’s some ‘otherworld forces’ at work in the stock market. It’s a strange coincidence worth noting.

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