This weekend a blogger asked me to analyze Google. After the analysis, I actually entered a trade today.
Here is my analysis.
1. Seasonal(not predictive of future results): The seasonal chart shows a bearish movement until 5/21. We only have 3 year of data but so far this year, price has followed the seasonal trend. Therefore, our seasonal charts indicate a bearish trend.
2. Analysis of GOOG
Below is the chart for GOOG. Right now, price is within the Kumo cloud so you have a lot of consolidation that is occuring. All the other indicators are showing a bullish sentiment still but they could change soon. From the Ichimoku system, there no trend trade at this. The 5/35 shows that the bullish momentum is almost over and could enter a bearish momentum very soon.
The analysis shows that the charts aren’t in a trend right now. However, the seasonal software shows that from 4/30 to 5/21, GOOG will go down. So far, price has dropped slowly from 4/30. We have some contridication at this time. So what do I do?
On the chart, I drew the 5/21 trend change date. I also drew the Fib Extension values. Based on a .886 Extension value, I drew a yellow arrow of the following price movement.
Since our charts shows that we are in a consolidation movement at this time, a low risk trade is needed which targets the .886 extension by 5/21. Low risk means we can’t short the stock. Volatility for GOOG is very high so the only option strategy we have is iron condor and butterflies. After the iron condor and butterfly analysis, a butterfly strategy was entered for 1 butterfly for $90. Since our charts do now shows a bearish trend yet, this would be a very low risk trade with huge “upside”. Below is the risk graph for the butterfly that was entered.
Goog was up early in the morning so the trade filled towards late morning.
The plan is to stay in this butterfly until May expiration week. During expiration week, the trade will be evaluated to determine if we should let it go to expiration day or to take the trade off for a profit before expiration day.
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