How GOOG Ended the Week and the Fall-out

Jul 19, 2008: 6:42 PM CST

Google Inc (GOOG) missed earnings this week and plunged almost 10% by week’s end.  Let’s look at the daily and weekly chart briefly to see if we can find any clues for potential price action in the future.

Google Daily:

With the failed earnings expectations, Google stock – proving once again why it is known as an extraordinarily volatile stock – fell $52.00 per share (almost 10%).   While the earnings expectations were a surprise, the current downtrend is not.

This is a classic example of how ‘surprises’ often occur in the direction of the prevailing trend, which is clearly down now on the daily chart (price formed a recent series of lower lows and lower highs before breaking the downward sloping trend channel).

The moving averages have now formed ‘the most bearish orientation possible’ and volume has accelerated to the downside.  The momentum oscillator has not yet registered a new low for the recent move, but will likely catch up soon before long.

Right now, barring a ‘relief’ or counter-rally, the path of least resistance appears to the downside, with an initial target being $450 which would fill the prior earnings gap.

Price now sits beneath the 61.2% Fibonacci retracement from the March bottom to the May peak.  This key retracement is located at $485 per share.

Google Weekly:

The weekly chart shows a strong run-up into ‘euphoria’ that turned way into distribution and then distressed selling into the beginning of 2008, with a potential ‘dead cat bounce’ or counter-rally in mid-2008 which takes us to our current sell-swing and violation of the key support zones from the weekly chart.

As seen from this chart, the path of least resistance also appears to be to the downside, barring some unforseen anouncement or buying strength not evidenced in the charts.

Will Apple (AAPL), a stock that has traded in a similar pattern to Google, follow suit?  AAPL is at key support zones and the violation of those zones could lead to a similar and potentially sudden move down.

Let’s continue to watch both of these stocks closely throughout the next few weeks.

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