Google shares made an important rally Thursday — one that brought Google stock to a first line of resistance. Now, Google looks like it can push higher still as it catches up with the broader tech and communications sectors, which also have rallied meaningfully in recent weeks.
When Google reported its fourth quarter earnings, it missed the analyst expectation; however, on January 30, investors were quick to push the stock up 5% on the day. If we look at this purely through the lens of investor psychology, when a stock can miss but still rally significantly (as a result of optimism about forward guidance), it’s a good sign of underlying strength.
On Thursday, news broke that Google will invest $300 million in Solar City Corp (SCTY) which may have been at least partially responsible for the rally in Google.Â
The late 2013 rally pushed Google stock higher into early 2014, but then settled the stock into what can now be labelled a very large bull flag pattern, which as the name indicates tends to ultimately resolve to the upside. From a momentum perspective, Google also has plenty higher left to go, as the Relative Strength Index (RSI) at the top of the chart in green is just beginning to curl higher.
On the daily chart below, after the most recent rally in Google stock, the entire price action since Dec. 15 could be looked at as a either double bottom or even an inverse head-and-shoulders pattern, either of which are bullish in nature. Google had a weak start to 2015, but by Jan. 12, it had developed a bottom that has since seen a series of higher lows develop, each with bullish reversal days on Jan. 29 and Feb. 24. The 200-day simple moving average (red line) has served as a good line in the sand for the stock over the years. In May 2014, the stock bounced off the moving average only to break below it in October. With Thursday’s 2.19% rally, GOOGL stock is now revisiting this moving average for the first time since last October
Investors that did not yet buy the stock on the break above $540 can now buy in the $550 area, while as always, any significant bearish reversal of the recent gains should be respected. If Google stock can hold the recent gains and consolidate around the 200-day for a while, then an ultimate break back above the moving average could get the stock moving back toward the $580-$600 area.
