Google GOOG Tests Critical Daily Confluence Support

Mar 18, 2011: 8:36 AM CST

I’ve been watching this level for a few days now and so far, a critical daily triple-confluence support level in Google (GOOG) is holding on cue.

Let’s take a quick look at this level and the implications if the level holds… or cracks.

Unlike the broader market, Google has not participated in a seemingly non-stop upward rally.  Instead, price remained trapped in a $100 sideways trading range… and a $100 sideways range is huge compared to virtually all other stocks!

So here we rest at the bottom of the sideways bigger rectangle pattern (blue horizontal line) but there’s more:

The 200 day Simple Moving Average rests at $549.60;

The 50% Fibonacci Retracement (drawn from the August 2010 low) rests at the $547 level;

Price filled a “gap” at the October 2010 high of $547.50

And for good measure, $550 is a simple “Round Number” reference level

So far, we have a ‘spike-low’ (wick) candle that pivoted up off the $550 confluence so that’s bullish in itself.

As per the usual case, either support will hold or it won’t, creating the following IF/THEN tradable price logic:

IF buyers support here at the critical $550 level, THEN we could see a rally to the $600 level (T1) or even to the top of the rectangle at $630 to $640 (T2);

IF sellers overpower buyers here, THEN the break of support could lead to a retest of the $450 level over time – hitting closer downside targets on the move lower.

Given that many traders I know trade Google with options instead of pure stock, this can allow for some good potential strategies for those so inclined.

Either way, whether you’re trading Google or just watching it as a key reference stock, watch what happens at $550 closely.

Corey Rosenbloom, CMT
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