Google: A Gap Play Setup

Google (GOOG) has run out of volume on the upside.  Last week was a holiday week, but you can see the volume divergence -  I’ve highlighted the gap in green.  My expectation is that we’ll get a pullback sometime here this week.  The gap could come into play.  The gap is right between the 61.8 and 78.6% fibo retracement on the hourly chart. I’ll put in a conditional order if Google hits 262.50  (middle of gap), then I’ll have a trailing buy stop 2.00 above the price, so that as the stock continues to move down, it will not be bought until it starts to move higher.  I’ll set my stop at 245 and my price target will be 375.  My risk to reward will be  100/20 or roughly 5:1.

I think we could see one of two outcomes here.  The indices could  gap up higher this week and the market could have another solid rally or we could begin a correction.  Indices are short term overbought and I feel that a correction is the most likely scenario.  I’m looking for long positions to own as we correct.  Google is a cash cow that I could be comfortable owning.

If Google does jump this week, I think it will hit some resistance at around 315, and then correct down from that level.

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