OK, It's Only 7%

By Dr. Duru written for One-Twenty

February 2, 2006

You all are going to start thinking I am obsessed with Google the way I keep writing about it. But when I hear technology investors like Cody Willard say that Google is the fast-growing company in the history of capitalism (listen at "Guest Host Aaron Task: All That Glitters", Feb 1, 2006), I know I am in good company! And ever since I turned bullish on Google's stock I seem to have a good read on what is going on with both the business and the stock. Speaking of which, my prophecy that $400 would continue to serve as some kind of magic number for GOOG for the time-being, played out very well on Monday.

So after the flurry of headlines, screaming panic, and consternation, Google's stock finished the day with a tad over a 7% loss. In the grand scheme of things, this drop is a pinprick. In fact, this drop is not even larger than the panic drop we saw in mid-January. I show the chart below with some key technical notes. The main thing to watch is how "sticky" this $400 level gets. I was amazed to see pundits immediately call any weakness in Google a buying opportunity to shop for a stock that had gone on sale. In my last Google missive, I wondered out loud how many analysts would come out sticking to their outright bullishness. Four out of five analysts who bothered to say anything came out with reiterations. Two of those analysts INCREASED their price targets! The other two gave minimal reductions. If you were looking for a bargain on Google, I think the sale has already passed you by for now. However, I also do not think GOOG can get much further than where it is now in the short-term given all the negativity in the air. But if nothing else, I hope you did not join in the panic. One of the themes I have hammered home in the past month is not to follow panic in this market. This advice worked well when you bought the dip in Japan with me, and this advice should save you many times as the market churns and chops its way to small overall gains.

Be careful out there!

DrDuru, 2006