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October 5, 2011  Wed 12:21 PM CT

GOOG: SEE CHART GET CHAIN FIND STRATEGIES
A potential bearish pattern is developing on the daily chart of Google, which was downgraded by Stifel Nicolaus today.
 
The chart below, which is plotted on a six-month basis, shows the baseline for a potential inverted "cup and handle" formation. The horizontal orange line at the $490 area is the trigger point. A sustained move below that line would see the pattern become active.

The pattern did become active yesterday and today, but price managed to move back above that $490 trigger level. The pattern has only a few days of viability left before it fades on the basis of time alone. If it does become active again, and remains so, it would have potential downside to the $420 area.

As it happens, that $420 downside target would put the stock back on the downtrend path that we can see on the left side of the chart. A move above the 10-day moving average, last at $518.39, would void the pattern completely.

In lowering its rating to a "hold" from a "buy" this morning, Stifel Nicolaus said that the search giant is losing its focus with its bid for Motorola Mobility and that "the Internet's center of gravity is shifting from Google to Facebook." GOOG is trading at $501.98 this afternoon, up fractionally on the session.

GOOG

(Chart courtesy of tradeMONSTER)
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