Thursday, October 13, 2011

Update on Google

Google is about to report earnings today as I wrote couple of posts earlier. Google has had a nice run into the earnings. In October 4th the stock price made an intra day low of 483. Yesterday it made an intra day high of about 553. That's a 14% return within 6 trading days. At the same time Nasdaq index has ran from 2302 to 2585 if you consider intra-day highs and lows. That's an impressive 12% return. So Google has outperformed the market, but just slightly. The reason for rising is not optimism for Google but optimism in general. This market is definitely becoming overextended and we will see a correction which might just be beginning today. It might have already begun yesterday, we will see. How it influences Google's shares after the earnings will be released is hard to tell. What we can tell however is that during the last year every time that market was overpriced (beginning of year) expectations were very high and shares were down after earnings. Same goes for opposite. After the correction in late spring expectations were lower and better than expected results sparked a rally.

Anyway short interest in GOOG has gone down all this time which mean that betting on stock price decline has decreased. That's good news. (Source. Dataexplorers)

Option data shows that put to call ratio has been constantly between 0,5-0,8 in recent weeks. This means that investors are betting on rising share price. There might be some heavy option action today as well so this needs to be looked at.

And in the end something for technical analysis fans. Google's share price has stayed in a range of 480-550 for quite a while now. If we were in a down trend then subsequent falls would make significantly lower lows after the initial fall. Staying in a quite narrow range might indicate that we are actually in an uptrend and we might be in the end of the correction. This kind of correction would usually end with a nice spike upwards.

Once again, I'm staying long into earnings. Now all Google has to do is deliver. 

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