GOOG Forms Ominous Bearish Signal

I wanted to highlight a critical area to watch in the stock of Google (Nasdaq: GOOG), both on the Daily and Weekly frame.

We could be on the verge of a sharp downturn, so we need to monitor both the breakdown level and overhead resistance that would disconfirm the bearish omen if broken.

First, the Weekly Chart:

A quick glance at the higher timeframe reveals that the 20 week EMA rests at the $545 level, which has become a key overhead resistance level to watch.

A break solidly above this level would trigger a likely short-covering rally and could stave off the bearish signals that are forming on the lower frames.

Otherwise, we see that a negative momentum divergence preceded the recent reversal—itself being a bearish non-confirmation that led to a downside sell-off retracement.

The key to determining if this is just a 'simple retracement swing' or something more ominous is in what happens here at the current levels, as best seen on the daily chart.

The reason I refer to this as an ominous bearish pattern (or development) is that price has formed a Bear-Flag style retracement into overhead resistance at the $545 level, which is a confluence resistance area due to the 20 week EMA and also—ironically perhaps—the 20 day EMA.

Beyond that, if we look at the volume insights, we see that volume rose sharply during the recent sell-off, and then during the rally into resistance, volume trailed off in a classic bearish non-confirmation (sending a further warning sign).

As it is, downside targets include prior price lows of $480, $460, and $440 if the sell-off materializes soon. Otherwise the weekly chart shows a target of $475 (200 week SMA).

As technical charting methods reveal probabilities, never certainties, it's important to monitor any open positions closely as price travels towards or away from the targets mentioned above.

Bulls want price above $550, but if they can't drive it there, then sellers could very well push Google's share prices lower. If anything, it's worth further analysis.

Corey Rosenbloom, CMT
http://blog.afraidtotrade.com