GOOG Short Trade Set-Up

GOOG is already part of the core short positions started, however I left room to add to GOOG at better prices, I still think that's a good possibility.

Here's where we are with GOOG, why the probabilities are to the short side and what I'm looking for to add.

 GOOG is a good example of how Technical Traders and their predictability has changed Technical Analysis as well as the bias that was baked in to them through QE1 and 2. GOOG is at a double top, some may have looked at GOOG as breaking out to a new high, however the parabolic move up out of the 2.5 year range is always suspect and just like the move in white looks to be ending badly, most parabolic moves do end badly as you can see to the left in yellow. This is the new double top, gone are the days of the second top falling short of the first top, instead we now see head fake breakouts setting up bull traps and when price fails, it fails pretty spectacularly.

 Here's an example of what happened after GOOG couldn't maintain the breakout, fear is stronger than greed and those two emotions are what move the market, thus downside moves are faster and uglier than upside moves. The process of downside discounting is often ugly and nothing close to moderate.

 A 5 day MoneyStream chart will show you the same thing multi-day 3C charts show, GOOG went negative with distribution in to the first top, since 2009 the QE regime has moved the market and stocks like AAPL and GOOG higher, but more on a sugar rush high than anything built on a solid foundation.

Just think about the economy in 2005, everyone owned homes that were appreciating like crazy, spending money, unemployment was low. REALLY, WHAT BUSINESS DOES THE MARKET HAVE IN THIS AREA IF IT WEREN'T FOR F_E_D LIQUIDITY? The result is a house built on a foundation of sand rather than rock.

 GOOG 3C daily chart since the 2007 top, the 2009 accumulation as it became apparent the D_E_D would hook up a drip line of liquidity to the economy/banks/market. The current leading negative divergence is the worst we have seen on this chart, there's a reason for that, traders know the F_E_D can only do so much and the liquidity has to be withdrawn at some point, that's where things get very ugly. The market has shown signs of the big players de-leveraging for a while.

 However, that doesn't mean GOOG can't move higher and offer us a great opportunity at better prices and lower risk. Note the confirmation, then negative divergence in to the top and a new positive divergence, this suggests that GOOG wants to move higher and shakeout the new shorts, we want to use a move like that to sell short in to as 3C turns negative on the move.

 The 1 min chart suggests GOOG is ready to move, in fact it already has started the move, this can be played from the long side for a bit, but the probabilities and the larger trade are on the short side, I'd rather be patient and wait for that rather than trade against the probabilities.

These are 3 target areas we are looking for in GOOG, if it makes it to these areas, we will use 3C and head fake moves to pinpoint the area to initiate new shorts or add to existing ones.