Saturday, January 23, 2010

Google's Founders to Sell 5M Shares, or $2.7B Each: Has Google Peaked? Full Analysis

The Wall Street Journal reports today that Larry Page and Sergey Brin have filed to sell 5M shares each of the company they founded, Google (GOOG). They intend to do so over the next 5 years. This would reduce their number of shares they own to 47.7M ($26.2B). Investors are already asking if this is related to China.

At the last closing price of $549, that is $2.745B for each (enough to feed all of Haiti for years, likely reconstruct the whole country with what they have. I hope this is what they will do).

Google has been hot lately. We have recently discussed Google, its new Nexus phone, and the battles with Baidu (BIDU) Apple (AAPL) and Rim (RIMM).



Earnings per share and net income growth


(please click to enlarge)

Buy or Sell Alerts

Google shows presently a long term buy signal (trade triangles):

However, the short term signal is negative:

See the last red arrow, the signal quite accurate too since it was issued.

Current backtesting of the long term buy and sell signals, based strictly on the trade triangles, results show an ROI of +119.43%:

The numbers correspond to an initial investment of $10,000.00)

If you wish to run the tool yourself, please use this link for 2 months bonus access, risk-free trial, guaranteed.


Technical Indicators:

  • 20 and 50 day moving averages indicate that GOOG may be in a bullish trend. This is because the 20 day moving average is above the 50 day moving average.
  • However, GOOG is below its 20 day MA. This bearish sign is even more significant because the moving average is also trending lower.
  • Bollinger Band: GOOG is trading below its lower Bollinger Band. Relative to recent price action, the stock is currently overextended to the downside and due for either a pause or retracement.
  • Volatility: GOOG's recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility.
  • Yesterday (Jan 22 2010), GOOG gapped -3.17% lower at the start of trading. Shares have continued to fall and the last sale was 550.01.
  • MACD: The MACD is presently offering a bearish signal because it is below the signal line, a 9 day moving average, and less than 0, which means that the underlying moving averages are trending lower.
  • OBV: The On Balance Volume indicator (OBV) presently offers a bearish signal. This is because the slope of the indicator is negative and shows that there is a lack of buying interest.
  • Stochastic Oscillator: The Stochastic Oscillator is registering a bearish signal as the %K is below the %D. However, GOOG is neither overbought nor oversold.
  • Volume Rate of Change: The Volume Rate of Change is not presently giving a clear signal.

RSI Signals

The daily RSI 7 is 19.37, indicating a very oversold condition. The weekly is 39.99 (neutral), and the monthly RSI 7 is 64.93, which is very close to overbought.

While the daily may not mean that the stock will begin to rally, it could also mean that a bottom may be forming.

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