Follow Up On Google. Let's Look At The Stock!

Chart courtesy of Prophet.net

Since I wrote about Google's business model and had a few extra minutes, I thought I would pop up a chart of Google. While I can't give investment advice on here nor will I share my secret sauce, it is interesting to note Google's chart. Charts are an integral part of trading because they almost become a self fulfilling prophecy. Hedge funds use them, professional traders use them and program trading uses them. If you trade, you must know how to do some basic charting.

This chart is of the entire stock history of Google. It is a weekly plot of prices. Notice how the price bounded around in a clearly defined channel on its rise. At the beginning of 2006 greed jammed the price up beyond the channel in a rapid rise of about 55%. This was near the time of the $2,000 stock price mania. This move failed and the stock collapsed to the bottom channel and started rising again. Google has now made a lower high in April of 2006 on the chart and failed to exceed its prior high. This is the first time such a phenomenon has happened and that is significant. Now, the decreasing trendline connecting the two prior highs acts as resistance to the stock rising. In addition, Google is forming what is known as a wedge pattern where you have a narrowing of the stock price into a conical pattern or an arrow pointing to the right.

This is usually a sign of pent up energy as the stock is becoming less and less volatile. So, which wedge trend line will be broken in a likely explosive move? Is the stock destined for new highs or a drop below its upward trendline? Google's earnings announcement will likely hold the key. To buy now and hold through earnings is not investing. It is gambling. We are likely very near a critical juncture for Google's stock.