Google

Here are three charts of Google: daily bars, hourly bars, and a 1 minute line chart.

I had been expecting the drop from the March 3 high at 387 (point c on the hourly chart) to stop above the February 15 low at 337.83. As you can see this morning GOOG has dropped as low as 333.50, breaking below that low.

The first order of business is to determine whether or not this breakout will lead to lower prices. If it does then I think the market would have to drop to 300 or so which is the blue line on the daily chart and is 3 and 1/8 the all time low traded price of 95.96.

However, I think there is good evidence that this downside breakout is a fake and will be followed by a strong move upward.

First of all, on the hourly chart you can see that the breakout occurred on unusually high volume. This to me looks more like a volume climax than a genuine breakout because a breakout move is usually accompanied by increasing but not huge volume. The second piece of evidence can be see on the 1 minute line chart. Notice that the swing into the low at point h was the shortest of all but one of the downswings from yesterday's early morning high near 358. Moreover, it point h was only a little below point f. Finally, the rally from h has been the biggest and longest of the downswing from point a.

Finally, the entire move down from the 397 high on February 28 is a classic three phase correction which I have marked on the hourly chart as a-b-c-d.

My best guess now is that GOOG will rally from this morning's low up to 356 or so. I am looking for a higher low after this initial rally to 356 and if it develops I shall expect a continuation up to 405 and eventually higher than that.