One Last Test for Google

• Posted by Greg Harmon
• on January 11th, 2012

You have all seen the interview questions that Google, $GOOG, uses to screen applicants. What’s the next number in this sequence: 10, 9, 60, 90, 70, 66 … ? You’re in a car with a helium balloon on a string that is tied to the floor. The windows are closed. When you step on the gas pedal, what happens to the balloon—does it move forward, move backward, or stay put? Quite a test of critical thinking and common sense. Pass it and you may get a chance at a great career with a smart group of people. But Google’s stock is itself facing a big test test that could determine if you would want to get paid in stock and options if you were offered a job there. After moving to a new high last week it is now back retesting the level of the break out on the daily chart below. This happens to be at the 50 day Simple Moving Average at 615. As it pulls back the Relative Strength Index (RSI) has remained positive and bullish but the Moving Average

Convergence Divergence (MACD) indicator is negative and growing. There is support at this level from the period just following the break of the dotted trend line but it is far from certain that is will pass this test and reverse higher. The importance of this comes into focus when taking a step back and looking at the weekly chart below. Google has been on the verge of greatness for some time. Back in October 2010 it nearly completed an Inverse Head and Shoulders that would have triggered a price target of about 1000. This quasi-neckline played a role in knocking it back last week when it printed a Shooting Star candle there that is being confirmed lower this week. Things

look a lot more positive on this timeframe though with both the RSI and the MACD supporting a move higher and the Bollinger bands shifting higher. Holding the same dotted trend line support could mean another test of the upside resistance. But the picture becomes crystal clear when backing out to the monthly chart below. It is only midway through the month so a lot of things can still happen in this picture, one of which would be a continued break above the ascending triangle. With positive support from the RSI and MACD this breakout would create a target of 830 with the only

resistance in the way at 700. So what is the importance of this test. The difference between falling back into the range, symmetrical triangle, or ascending triangle and a chance at greatness. Isn’t that what Google is all about?

The interview questions are from a December 24, 2011 article that appeared in the Wall Street Journal. You may need to subscribe to access it here.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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