Two Timeframe Action in Google GOOG at the Key 500 Level

Jun 16, 2011: 12:05 PM CST

Google shares (GOOG) have fallen to a critical “make or break” price support level as seen both on the weekly and daily chart.

Let’s take a look at the two-timeframe action and see what the current chart says about potential opportunities.

Google (GOOG) Weekly:

Cutting right to the chase, the flat 200 week Simple Moving Average (red) rests at $505.30 per share (rounded to $505).

That’s an indicator to watch, but perhaps the more important reference level traders are watching is simpler than that – the “Round Number” at $500 per share (Wednesday’s low).

Volume on the weekly frame is slightly diverging or declining into this level (that means there’s not yet a frantic/panic of selling pressure) and momentum – both on the daily and weekly frame – is positively diverging with price.

Given this, one could logically expect a rally up from this level as buyers defend the $500 level.

Of course, a failure at $500 (a breakdown here) changes the game and fully gives the chart to the bears, opening up a potential ‘feedback loop’ of selling (buyers liquidating and sellers adding to their short positions) which sets up for a play to the prior support at $450 as drawn.

These are your ‘simple’ higher timeframe levels to watch in Google.

Let’s turn now to the Daily Chart for its signals and structure:

Looking back, we had a similar “Battle” to hold key support at the $600 per share “round number” region.

After the December 2011 break, we had three ‘tests’ of this level which gave aggressive traders a chance to buy-into support with a tight stop just under the $600 price.

That aggressive strategy worked well in February but not so much when price cleanly broke and closed (not just intraday) under the $600 price in early March.

That was a “sell short” signal on a breakdown … and after some retracements into EMA resistance along the way … we now face a similar test at $500.

Traders – particularly those who swing trade Google with options strategies – have a chance to play a similar “Game of Support” at the $500 level.

Price can’t stay at the $500 pivot forever – it’s either going to inflect upwards for a quick swing trade opportunity… or break down sharply under the $500 support and head towards the likely targets (weekly chart) at $450.

This is the Mark Douglas logic of trading at inflection points and playing the resolution/winning side.

A firm move above $520 tips the odds strongly in favor of the buyers, as that would break the falling 20d EMA.  A continuation break above the 50d EMA at $535 is a further bullish trigger signal.

Keep watching the price structure relative to these important levels as it develops – keeping in mind Friday is an Options Expiration event.

Corey Rosenbloom, CMT
Afraid to Trade.com

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3 Comments

3 Responses to “Two Timeframe Action in Google GOOG at the Key 500 Level”

  1. Roberto Says:

    Friday is Quadruple Witching. And what does that mean? Staying above $500,- and then drop like a stone? Or what?

    BTW, great article.

  2. Corey Rosenbloom, CMT Says:

    Good question!

    I mainly mentioned the OpEx comment in regards to possible “Pinning to

    the Strike” of $500 which is an obvious level.

    There tends to be strange volatility near OpEx and things tend to return

    to normal in the next week.

  3. AK84 Says:

    Hi Corey. How do you feel about the chart of GOOG now heading into earnings tomorrow ? On the weekly timeframe, it is having a hard time breaking into the wedge pattern at 540. daily looks ok …wat do u make of it ? also 20 crosses over 50 on weekly. many thanks