Watching a Triangle Pattern in Google GOOG

Mar 20, 2013: 4:49 PM CST

For short-term traders, Google (GOOG) is forming an interesting compression triangle pattern that may warrant our attention.

Let’s start with the Daily Chart, note the key levels with structure, and then zoom into the lower frame charts to highlight a price compression triangle at work.

Starting with the structure, Google (GOOG) remains so far in a long-since confirmed uptrend and is currently challenging critical support into the $800 to $805 per share level.

That zone should be our focal point with respect to the short-term opportunities developing.

I highlighted a similar sharp pullback in January and we can see the outcome of that pattern through February. Keep focused on this broader “flag/retracement” pattern for potential trend continuity to the upside.

The bullish outcome would be a pro-trend continuation towards – and perhaps above – the $840 price high recently formed in March.

When trade planning, we have to consider the alternate case which would be that of a bearish breakdown in the event that sellers pushed price under the $800 to $805 key short-term support.

In this case, a potential breakdown could easily target the next lower support confluence into the $785 (50 day EMA and lower Bollinger Band) or even toward $765 region (prior price high).

In other words, what happens near-term at the $800/$805 level is key to short-term trade planning.

With that, we’ll step inside the hourly intraday chart to see a short-term triangle pattern developing:

Price recently – at least so far – held the early March breakout polarity level near $805 per share and the game-planning for the near future will center on whether or not buyers can hold price above $805 and prevent a sharp sell-off or short-term breakdown event under $800.

For those who prefer trading breakout strategies, particularly from triangles, a breakthrough above the EMA and trendline confluence into the current $815 level could result in an impulse breakout and higher timeframe pro-trend continuation movement toward the $840 level or higher.

Of course, the opposite trade planning – a breakdown opportunity – could occur on a firm breakdown under $800.

Again, the $785 level would be a simple target that could be achieved quickly (it’s the prior low and daily chart indicator support).

For finer detail and structure, let’s glance at the 15-min chart for a clear picture of the triangle:

You can draw and update these or similar trendlines on your own charts, particularly in real-time as price either trades back within the boundaries under $814 or else attempts a breakout impulse above $816, $818, and finally $820.

It would be helpful for short-term traders to focus on these levels as price interacts at the $812 “Value Area” or midpoint of the triangle.

Does price depart (break higher) from this area with increasing volume (suggesting a higher move via the daily chart pro-trend impulse)?

Does price instead return within the boundaries under $814 and begin trading down toward the $810 level? If so, does price then hold $810 or else collapse under it quickly – on higher volume – toward $806?

Trades can develop as real-time answers to these chart-based questions.

Even if you’re swing trading based on the higher timeframe chart, patterns and entry (and trade management) signals often appear clearer on the lower frame charts (the triangle is not present on the Daily Chart, for example).

Corey Rosenbloom, CMT
Afraid to Trade.com

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