Here are a few things to ponder if you’re trading Google and/or Facebook. (October 18, 2012)
GOOG
I’m Dan Fitzpatrick at StockMarketMentor and OptionMarketMentor.com on Saturday, October 20th. I want to just take a quick look at Google ( $GOOG Google Inc ). This is what happens when a growth stock suddenly the company says, “Well guess what? We’re not growing as fast.” It’s not whether a company’s growing that dictates the stock price. What dictates the stock price is how much the growth is growing. In other words the company’s growing at, you know, 32 percent a year; so the market factors in the company will continue to grow 32 percent a year, or maybe the markets looking ahead and saying, “Well, gosh they’re going to grow 32 percent this year but I think they’re going to grow 50 percent next year.” So that is priced in, you get these lofty prices, you get these lofty multiples from traders and investors because they see greater growth or more growth, higher growth in the future. That’s the price so now if a company like Google ( $GOOG Google Inc ) or any company comes out and says, and I just picked 32 out of the air, if they come out and say, “Well guess what? The good news is we’re still growing, the bad news is that we’re only growing at 22 percent but it’s still pretty good, 22 percent. Well the problem with with that is that what they’ve really done is loped off one-third of their growth rate. The markets going to say, “Well if you’re growing at 32 percent now suddenly you’re growing at 22 percent, what’s going to happen next year? Are you going say that you’re growing at 11 percent or 20 percent or is this a one-time blip? That’s the nature of markets so once a growth story becomes of bad story then the wheels come off the wagon really, really quick, the momentum traders who were controlling the stock, they get out and you know what they do? Do they wait to buy back in? No they move on to the next uptrend because you know some momentum funds, that’s what they do, they trade relative strength. Suddenly Google ( $GOOG Google Inc ) ain’t relatively strong, relative to anything. So I just wanted to explain this to you so you’re wondering why when you bought the stock here at $750.00 and now the stocks down at $681.00, why nobody wants to buy your stock at $750.00. It’s because things have changed, so here’s my plan on this. We had were to really, really big days of volume on Thursday and Friday but I want to look at Friday and will break it down to the five-minute chart. Look at where, okay this is when they opened it on Thursday throughout the rest of the day, this is Friday, at 9:35 this was the volume that we got. We got the lion’s share, like massive volume during the first five minutes of trading when the stock went up and then it started trading down, it traded down basically the rest of the day. The reason I’m mentioning that is I would view the selling pressure to have been finished, to have run its course probably right around there, probably right about the time that a lot of the traders assistance were out to lunch on wall street, it’s about the time they go. So all the selling really was done here and the reason I’m pointing that out is now let’s go back to the daily chart and I’m looking at this, I don’t think you’re going to get these type of volume bars on Monday I would be really, really shocked if you did. So I’m actually looking as a trade to take a trade to the long side and I would want to enter that trade when Google ( $GOOG Google Inc ), let’s just say Google ( $GOOG Google Inc ) opens up at the the intraday low from Friday, $672.00. A meaningful move to me would be when it starts trading above the close which is $681.00. So if Google ( $GOOG Google Inc ) starts trading up like this this is going to be meaningful to me, now I know that the selling pressures done, Google’s ( $GOOG Google Inc ) going to move higher. How much higher? Couldn’t tell you, I don’t know. Some people will say that they can tell you, but you know what? Those people are all liers they really don’t know. Another way though is if Google ( $GOOG Google Inc ) happens to gap down on Monday then I’m going to be watching Friday’s intraday low, again of $672.00, that level, on a down gap, that level needs to hold; if it holds and Google ( $GOOG Google Inc ) starts trading up from there, fine, I’ll buy. If it does not hold and Google ( $GOOG Google Inc ) starts trading lower that’s another story and I’m not going to get into that now. There’s definitely a way you can trade that as well but that’s enough for this video. Anyway that’s a couple different ways that I’d be looking to trade Google ( $GOOG Google Inc ). I hope this helps you. Members get over to the Weekend Update, I got a lot of stuff there. Also if you have not gone to Option Market Mentor I want to get over there today and sign up for the free trial, it’s close to free anyway, it’s s$7.77. Our trades have been doing very well over there and I want you in on them. Free Chart