Quick Charting Google GOOG into New Highs

Dec 30, 2011: 7:52 PM CST

Will history repeat or will this time be different?

That’s the famous question we’re all asking right now as Google shares break to new multi-year recovery highs not seen since late 2007.

Let’s peek at the Weekly chart, note the key level to watch, and then compare that with what’s happening right now on the Daily Chart.

Cutting through all the clutter, the $630 to $640 price level served as formidable resistance after peaking there in early 2010.

Each time price reached the $630 region, sellers stepped up to prevent a breakout and further rally into new recovery high territory.

And each time a sell-off resulted, buyers stepped in at higher prices (higher swing lows) to establish $500 as the current floor of support.

That gives us two possibilities to watch for confirmation as we begin 2012:

Either “History Will Repeat” and we’ll see a similar movement back towards the $500 level as sellers step in,

OR “This Time Will Be Different” where we will see buyers push shares into breakout/impulse mode above $640, resulting in a potential feedback loop (shorts covering; buyers buying).

That’s stating it as simple as possible as you look to your other indicators for confirmation/non-confirmation or additional signals.

To throw two of them quickly into the mix – volume is negatively diverging with price as we see an ‘overextended’ movement into the upper Bollinger Band on both the Weekly and Daily Charts.

Speaking of the Daily Chart, let’s take a closer look at the recent action:

I highlighted the recent peaks and reversals into the $630 level.

Note that November gave us an initial collapse (on schedule) towards lower targets, but buyers reclaimed the balance to force a short-squeeze and thus Bear Trap as December began.

The short-squeeze/power rally (busted bear trap) brings us to the current push to new recovery highs, though again on negative volume and momentum divergences.

We can account the negative volume divergence in part to end-of-year holiday volume, but still watch volume to see if any spikes or unusual activity occurs early in 2012.

The simple structure gives you a binary game-plan to use as a foundation:

Bullish above $640 for impulsive breakout, or else cautious/Bearish on continued movement under $640 ( that declines beneath the daily EMAs at $626 and 606 respectively).

Watch the daily chart – in conjunction with the weekly ‘open air’ – closely as we turn the corner into 2012.

Corey Rosenbloom, CMT
Afraid to Trade.com

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3 Responses to “Quick Charting Google GOOG into New Highs”

  1. Marko Uremovic Says:

    The low volume will and does concern many position/swing traders.  Should be interesting to see if this takes off, or just goes down in history as a daytrader bleep.

  2. RS2OOO Says:

    That low volume seems to be a trait of so many recent break-outs that I came across whilst charting DOW 30. However, the first thing I thought of when looking at that top daily chart was it's almost identical pattern to GBP:CAD

  3. RS2OOO Says:

    My previous comment has disappeared…. Was just pointing out that the GOOG pattern is almost identical to the current GBP:CAD pattern but the interesting difference is in MACD.