GOOG: Top Signal Below Critical Resistance Line!Key Observations:
Inverted Head and Shoulders Pattern: The chart recently completed an inverted head and shoulders pattern, which is a bullish reversal signal. This breakout above the neckline (around $170.41) confirms the bullish sentiment.
Gap Resistance: There is a notable gap resistance around $183.33. Gaps often act as strong resistance levels, and the price exploded after the last earnings report, just to close its previous gap (with an incredible technical precision, by the way).
Top Signal Below Gap Resistance: The recent price action has shown a possible "top signal" just below the gap resistance level at $183.33. This could indicate exhaustion in the current bullish momentum and a potential area where sellers may become more active. What's more, according to Bulkowski's studies, a pullback after the breakout of the neckline of an iH&S occurs 65% of the time (Encyclopedia of Chart Patern). If GOOG is about to makes a sharper coreection, the timing couldn't be better.
21-day EMA: The 21-day EMA (blue line) is trending upwards and has provided strong support throughout this uptrend. As long as the price stays above this moving average, the overall trend remains bullish.
Conclusion:
GOOG is materializing a mid-term pullback, as observed on the daily chartt, which is statistically plausible. The 21-day EMA, along with the neckline at $170 are our next technical support levels. For now, there is no technical evidence suggesting that GOOG will reject the idea of a correction.
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Remember, real trading is reactive, not predictive, so let's stay focused on the key points described above and only trade when there is confirmation.
“To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate.” — Jesse Lauriston Livermore
All the best,
Nathan.
