ChartWatch: Google (GOOG) Shares Expected to Bounce

In a little over a month Google (NASDAQ: GOOG) shares have dropped more than 10% from its $638 high. Of course, an obvious sequence telegraphed this big move and did not come as a surprise to readers. However, Google is resting near a strong support area from which the shares have bounced twice in the past six months (blue arrows).

Google is one of my favorite technology companies — I own the shares of it in my retirement account. The company’s ability to generate money from paid search makes them a strong company to own for the long haul. Additionally, they dominate the online advertising industry and have virtually no opposition in the search market.

Despite the company’s financial success, Google shares cannot win any ground. The shares have traded sideways for more than one year and $630 (blue line) continues to act as near-impenetrable resistance.

Once Google does make a sustained run past $630, the shares should reach $700 quickly. Even at $700 the stock would be cheap and trade at 16 times the expected 2012 EPS of $43.27. This earnings multiple is dirt cheap for a company that consistently delivers record operating results.

Traders and long-term investors should be looking to buy GOOG shares. For traders the near-term upside is likely capped at $630. However, those with a longer timeframe could put themselves in a position to profit as GOOG blasts to at least $700 over the next year.

Edit ChartThis chart shows the price of Google shares along with an important resistance area for you to monitor

Equities mentioned in this article: GOOG

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