GOOG has been a core short position for a little while and is at break even, I think GOOG has a decent chance to make a move higher and I only added 2/3rds of the position size I'd be looking for so adding at higher prices is what I want to do, but I need to decide whether to cover GOOG and wait on higher prices.
I decided not to cover GOOG and leave it open as the position sizing leaves plenty of room in the risk management side of things, also I have to look at the big picture and where probabilities are, even though I have opened some long positions to take advantage of what I believe will be a volatility shakeout, these are meant to be speculative in size, if I cover too many core shorts I'm left too much long exposure that goes against the larger picture probabilities and that's just not smart from my perspective.
In any case, here's what GOOG looks like now.
(Weekly chart) GOOG went from a somewhat steady uptrend to a parabolic trend in 2012, you know how I feel about parabolic moves and these kinds of changes in character, they don't usually end well and they are screaming out to us to pay attention as something has changed. If GOOG were to continue down here it would be in scale for the move, however things are rarely that neat in the market.
Goog's daily 3C chart is in a leading negative divergence, this is a very strong signal on a daily chart and I don't think GOOG can come back from this, ultimately as a core short position this is one reason I decided to leave it open, As you can see, Stochastics (30/4/5) were embedded on the move up, this is a sign of price strength, but the underlying trade was showing distribution in to higher prices and demand. Now Stochastics look like they are ready to turn up after GOOG has seen this recent move down.
On a 30 min chart, and this is where I'm looking for the next move in the market (a volatility shakeout of the shorts with an upside move, allowing us to cash in on some leveraged longs and set up shorts or add to them) shows GOOG with a negative divergence right at the top and a leading positive divergence since it has consolidated laterally over the last week or so, the same lateral consolidation we were looking for in the market. I have to take this 30 min. positive divergence seriously, but I'll be looking to fill out the GOOG short and for those that may be interested in GOOG short and have no position, it will likely be a great entry.
The look of the price pattern in the red box is like a bear flag, it's not quite a flag though. Technical Traders will be expecting GOOG to make a new leg down, about the same as the last leg down, however based on the 30 min positive, I'm thinking GOOG moves up at least to the century mark at $700.
One other reason I'm not inclined to cover GOOG and trade around it here is that the shorter term charts don't look that great, while the 30 min chart is more important than the shorter term charts, if I had seen amazingly strong positives in the short charts and through 30 min, then I may have considered trading around GOOD. As it stands, I'd rather my longer term positions represent my longer term views.
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