Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Google’s Chart Predicts a Breakout That Could Lead to Fast Profits

Momentum remains on the side of technology giant Google Inc (NASDAQ:GOOG) despite the large gains already made in 2013. Following a big post-earnings rally in mid-October, the stock consolidated and is forming a tight bullish wedge pattern. This offers traders another juicy long-side breakout trade.

Tight patterns often lead to quick moves. A break to new highs would keep the momentum on the side of the bulls, while any break below the consolidation pattern would be equally bearish and serve as an automatic stop-out area.

The company reported third-quarter results after the close on Oct. 17, beating analysts’ estimates on all fronts. Earnings per share (EPS) were up 19% to $10.74 from the same quarter a year ago, beating estimates of $10.34 by a good margin. Revenue was up 12% to $14.9 billion, slightly better than the consensus estimate.

Google Inc (NASDAQ:GOOG)As a result, the stock exploded higher on massive volume on Oct. 18, and it has not looked back since. GOOG shareholders are no strangers to good-sized post-earnings moves, but the 13.8% rally was larger than usual, and it took the stock above $1,000 for the first time, setting a new all-time high.

GOOG is up 43% year to date, and while displaying a steep slope and medium-term overbought levels, stocks in this type of pattern can continue higher for longer than many can stay short. Because we always need to consider both sides of the coin, however, I would be remiss not to mention that if a bearish reversal were to occur, it should be respected.

From more of a structural point of view, the broader U.S. stock market, as measured by the S&P 500, is higher by about 24% this year. Many institutional investors remain under-invested and most likely are underperforming the market.

Despite the fact that some mutual funds are closing the books for their year on Oct. 31, most funds are open for business until the end of the calendar year and are looking to buy dips or chase breakouts.

Keeping this in mind, and also noting that GOOG offers good trading volume, plenty of institutional research coverage and is playing in an industry with lots of growth potential, we have a stock that has a natural bid at least in the medium term.

In terms of momentum, Wilder’s Relative Strength Index (RSI) and stochastic oscillators on the weekly chart above are pointing in the right direction (up) and have room to the upside.

Also, in a trend-following situation as is currently the case for many institutional and individual investors in GOOG, momentum oscillators can remain “overbought” for a long time, making them fairly irrelevant. What would be noteworthy and make me more cautious is negative divergence between the stock’s price and momentum oscillators, which is not yet the case.

Moving on to the daily chart, GOOG held its 200-day moving average in early October, and with the post-earnings rally, broke out of a multi-month consolidation phase. The fact that this rally came out of a solid base rather than a steep slope further supports the bullish case.

In the past two weeks since the earnings announcement, the stock has formed a tight consolidation pattern, a break above which could easily push it 5% higher in the short term.

Recommended Trade Setup:

— Buy GOOG on a break above $1,035
— Set stop-loss at $1,010
— Set initial price target at $1,090 for a potential 5% gain in 2-4 weeks

$1,000 Per Month Trading System

You could collect $1,000 or more per month without buying a single stock. Click here to learn how…

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!