Google Shatters $500 per share

Today, Google (GOOG) shocked traders and investors alike, blowing past potential support at $500 per share and gapping down on significant volume to form a semi-hammer pattern.

Let’s look before describing the picture:

First, notice the massive triangle break-down toward the end of 2007. This led to a large volatility price move to the downside as the new year began.

Recently, price completed a bear flag pattern after completing a measured move down.

Notice the 45 degree angle pullback to the falling 20 period moving average that set-up both an impulse sell trade and a bear flag retracement trade (short-sell).

Also, notice the massive volume on today’s trading (23 million shares!), indicating a large volume of shares trading hands. Are retail traders just now starting to sell or get short? Is it too late?

Although the pattern is very faint, today’s price action formed a hammer candlestick, which could potentially be bullish, as it has formed after a large downtrend move. Might price rally to attempt a gap close in the coming days?

What caused today’s downside move? UBS released a report saying that with a slowing economy, advertising revenue at Google would fall due to fewer companies buying advertisements through the company. Either way, it is a lesson that price shocks often occur in the direction of the prevailing trend.

Adam Hewison offers analysis on Google which includes pivot points and continuation patterns in his video post “Did Someone Ring the Bell on Google?”

It’s also a testament to how volatile high-flying Google can be both on the upside and the downside.