Friday, October 14, 2011

Google blows away expectations

     Our favorite benefactor Google, reported monstrous earnings yesterday and the stockholders are reaping the rewards today.  Google was up more than 6% today after reporting a 26% gain in profits from a year ago.

     Google makes most of it's money from search ads and it has 76% of the US market and even more of the rest of the world.

     The number of clicks on ads rose 28% from the year ago period and the price they charge per click increased 5%.

     Google +, Google's answer to the Facebook threat increased it's user base to 40,000,000 increasing from 10,000,000 in July.

     Google is also grabbing a larger share of the smartphone marketplace with over 190,000,000 Android phones active worldwide.

     Google's profit for the 3rd quarter was 2.3 billion on sales of 7.51 billion.This equates to profits of about 8.33/share.  Google is a cash machine.

     Market's are up on this good news continuing the positive momentum of the past 2 weeks.  As of 8:00 AM PST the DOW is up almost 1%.  The SNP 500 keeps bumping it's head on the 1220 level.



Market Recap
     Could this be the start of a new bull market in stocks??

    The past six months have been pretty brutal in stocks.  Since the market topped out on May 1st, 2011 at 137.18, the SNP 500 lost 21.7% of its value bottoming out at 107.43 on October 4th, 2011 indicating we are in a bear market.  Since October 4th, the SNP has rallied furiously gaining 14.1%.

     There is a technical indicator called the "Zweig Breadth Thrust"(credit to DeerIslander from Fidelity Family Forum for alerting me to this) that says we are in a new bull market.  Basically, a bullish signal is triggered if there is an increase in the indicator from .40 to .615 in 10 days.  After this indicator is confirmed, stocks have gained an average of 20% in the next 12 months.  Today, the indicator was confirmed.  The last Zwieg Breadth Thrust bullish signal was in March of 2009 which foreshadowed a 100% gain of the markets.

     While the macro backdrop looks bleak, that is often the case when bull markets start.

     Today was a very positive day in the markets.  We finished right at horizontal resistance on the SPY chart breaking through the magical 1220 level near the close.
This market looks like it wants to go higher and I would not fight it.

     AAPL also had a very bullish day rising nearly 3% to close at an all time high.  AAPL looks like it wants to go to 450 and I think it gets there.  Press your bets on AAPL.



How to Read the Chart
        Some people were asking how to read the chart.  Basically, the chart measures the price of a stock over time.  Each red or green rectangle is called a candlestick.  Each candlestick measures the price movement of that particular day.  For example, the red candlestick is a day where the stock price opened at the top of the body of the red candlestick and finished the day at the bottom of the body of the candlestick.  Green candlesticks are the opposite. We opened at the bottom of the candlestick and finished at the top.

     If you look at the candlestick for October 4th on the above SPY chart, you can see we opened at 108(the bottom of the body of the green candlestick), then went even lower to reach the low of the day at 107.43 and then zoomed back upward to finish the day at around 112.50 creating a green candlestick.

     Also, the light blue lines represent the 50 day and 200 day moving averages.  It would take a longer discussion than I could give here to discuss the significance of these price levels but trust me when I say they are important levels for a stock.

     The light blue bars coming up from the bottom of the chart measures the volume of the stock for that particular day.  The higher the bar, the more times the stock was bought or sold that day.

    The red line is a line I drew on the chart which is a trendline.  Oftentimes, stocks make these types of patterns on the charts and it is useful to note them because if the stock moves up past them or down from them it is significant.  As you can see from the AAPL chart above, once we broke above the red downtrend line, we zoomed upwards.



Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!

17 comments:

  1. Google overlords, already taking over everything one step at a time.

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  2. Yep, they made good move releasing Android, that's why Nokia decided to have Windows mobile (to keep market competitive)

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  3. google and apple, kings of the world.

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  4. Wow google is becoming a big company. You think in the movie Alien and the movie Avatar when they mention "the Company" they're refering to google?

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  5. This post really makes me wish I had started investing in Google ages ago! These increases are absolutely amazing and are much deserved. At least Google increases means good things for me considering I'm using AdSense and all. Long may these increases continue!

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  6. Wow, I sure would love to have google shares right now.

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  7. Google is amazing and scary because with high profits there is also the risk of breaking too easily

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  8. I'm just glad anyone is doing good. It means good things for the right now.

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  9. LOL at Bersercules comment

    google is becoming china, facebook is a good site everything else is google!

    if you have +1 accounts, i will follow you ^_^

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  10. As long as Google keeps writing me checks I will continue to cheer their glorious takeover. Go Google!

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  11. I, for one, welcome our new Googley overlords.

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  12. Wait. Google + has FORTY MILLION users?

    That's incredible, especially with its age restriction.

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  13. Google is a great company, even though they blocked my AdSense account :/

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  14. I dont know sh*t about stocks but I called this

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  15. Wow! Google is steadily climbing the top. Also, I really appreciate the chart explanation, I'm new to this stock market thing and I don't understand much yet.

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  16. I remember when GOOG went public in 2004. I was working with Smith Barney at the time and firm was one of the underwriters. I saw it was priced at $85/share and I thought "$85 for a tech company with no profits? I'll pass." Oooooops, I blew that one!

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  17. google google google!

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