Looking for Google' shares to rally to the stock's all-time high? Now may be the time to catch the ride.
The Stock: Google Inc. (GOOG-Q) Recent price: $612.53 (U.S.)
The Trend
Three months ago, in the dog days of summer, this column suggested that
the technology sector was following a bearish trend and advised backing
away from or shorting big-capitalization tech stocks. However, the
sector rebounded with the rest of the market in September; the Nasdaq
100 index, representing blue-chip techs, galloped to a 17 per cent gain
in the past two months, hitting new 52-week highs this month. Of course,
a big contributor to that performance is Apple Inc. But developing
trends in other tech shares suggest it's time to take another swing at
the sector.
Global tech stocks have come to the fore again, with the Stock Trends
weekly trend filters recently plucking a number of tech names as
potential buy candidates, including Qualcomm, Cypress Semiconductor,
Logitech International, Xerox Corp., Alcatel-Lucent, and Sierra
Wireless, as well as technology-based exchange-traded funds such as the
Select Sector SPDR Technology. Rallying during the period, too, are
Amazon and eBay - both stocks reached new 52-week highs. Next to
precious metals stocks, tech equities are attracting the most bullish
investor interest in U.S. markets this quarter.
The Trade
Google shares have rallied from the $450 level at the beginning of
September to a $600 stock again after strong earnings drove shares
higher earlier this month and primed investors for another bull trend
for this marquee stock. Google's stock has an impressive performance
history once a positive price trend has established itself. Last year's
bull trend raised Google's share price from below $400 back to a $630
peak before slipping early this year. An approaching Stock Trends
Bullish Crossover - a cue that a new long-term bullish trend is
commencing - as well as the opportunity to scale an important resistance
level at the 2010 high could once again open up the stock to a forceful
rally. Scaling the $630 mark should trigger more trading and would be a
good entry point.
The Upside
While the summer technology call would count as a bad slice into the
woods, an August, 2009, profile of Google in this column proved to be a
smashing drive down the centre of the fairway. A Stock Trends Bullish
Crossover stock at the time, Google's chart indicated that a move above
the $450 level would clear overhead resistance and signal a return to
plus-$500 valuations before the end of the third quarter of last year.
And so it came to be. The stock peaked near $630 at the beginning of
this year before sending sell signals as the stock abruptly dropped
below its intermediate-term trend line. A late February exit on that
bull trend around the $530 level would have been advised before Google's
shares were classified as Stock Trends Bearish in May. Replicating that
20 per cent market timing return would demand a rally to the stock's
all-time high at $747 - a price that aptly conjures up a jumbo jet.
Google bulls are waiting to see it soar again.
The Downside
Google's high share price excludes most retail investors from taking a
new, direct equity holding. Those that can will want to see the stock
stay above $600.