Google Surges, Forms Dark Cloud Cover

May 3, 2008: 11:47 AM CST

Google Inc (GOOG) has been on a powerful move up, surging from $440 to $600 in less than a month.  Following the upside $80 gap recently, the stock has impressed investors by adding another $80 points since the gap.  But let’s look at the current action to see if this is sustainable.

The price action has been nothing shy of stellar since March’s bottom near $420.

Google consolidated and formed sort of a saucer bottom (complete with positive momentum divergences) before launching into the stratosphere to regain lost ground.  The stock has continued higher without a significant retracement.

While the action of the last few days gives bulls hope, the stock did form a Dark Cloud Cover Candlestick formation, which typically is a sort of bearish reversal pattern.

Caution:  Candlestick analysis should not be heeded alone – confirm signals with other analysis before acting.

I’m sure most of us have been watching Google eagerly and with great wonder.  If you haven’t bought yet, I would gently suggest waiting for some sort of retracement, because as price surges higher, risk surges higher as well.

With the stock above its 200 period moving average, the bullish camp has more to celebrate, but it will be interesting to see how long they can literally dominate the sellers (bears) in the stock.  Keep your eye on this stock!

5 Comments

5 Responses to “Google Surges, Forms Dark Cloud Cover”

  1. Vlada Kynsky Says:

    Hello Corey,
    I watched GOOG closely as well. And also i think there will be some slight correction. But from mid/long term perspective I am still bullish with Google.
    Regards
    Vlada

  2. thurmond osgood Says:

    Although I am long GOOG, I too shared your assessment of a slight retracement. This was before the announcement of the MSFT/YHOO deal falling through. I am anticipating a nice sized pop on Monday for GOOG to the tune of closing at 620. From there it will be curious to see how it plays out during the week. My gut feeling tells me that if in fact there is no MSFT/YHOO deal, GOOG will look mighty attractive to investors.

  3. Corey Rosenbloom Says:

    Vlada,

    I’m with you 100%. This stock is an absolute powerhouse, and any retracement should be a good buying opportunity. If this stock fails to retrace, then that’s a strong signal as well.

    Thank you for the comment.

  4. Corey Rosenbloom Says:

    Thurmond,

    Yes, I wrote this article on Saturday and can’t really pull it now 🙂 On Sunday, Microsoft pulled its offer because Yahoo demanded too much money, and you’re right. I expect a potential play to be short Yahoo (but most of it will fall before any orders can be entered), long Google (again, most will occur overnight) and potentially long Microsoft.

    It’s amazing that so many major stocks are affected by this development and announcement. Of course, there will be ripples that will be hard to anticipate in smaller stocks and of course the broader indexes because of this development.

    Good call!

  5. Corey Rosenbloom Says:

    Vlada,

    I'm with you 100%. This stock is an absolute powerhouse, and any retracement should be a good buying opportunity. If this stock fails to retrace, then that's a strong signal as well.

    Thank you for the comment.