Here’s a preview of what I’ll be discussing on Talking Numbers today between 3:20 and 3:30 pm EST on CNBC:
Ever since a strong earnings report in July, GOOG has been on a one-way train to new highs, rallying about 20% in just the past month. It broke out above the important $650 resistance level last week, joining its tech brethren in leading this market higher. However, GOOG’s breakout was tepid to say the least.
The first chart is a 5 year weekly chart of GOOG:
The stock has tested the $650 level multiple times, falling back from it on at least 5 different occasions since late 2009. So last week’s clean breakout above it would normally be a reason for optimism. But after so many failed attempts, I would expect a stronger reaction from traders on seeing that level cleanly breached. In contrast, the weekly volume last week was only average for the past year, and on the low end of the past few years, indicating potential exhaustion and a possible failed breakout.
In addition, I don’t see much potential upside with the 2007 highs in the 700-750 area looming as potential supply.
The second chart compares GOOG vs. QQQ performance since the start of 2012:
Despite the recent strength, GOOG has actually been a big underperformer in 2012, adding fuel to the argument that the current breakout is likely a false breakout. With the QQQ Nasdaq ETF up more than 20%, GOOG is barely higher on the year, exhibiting significant relative weakness.