Google Spunk

By Dr. Duru written for One-Twenty

July 20, 2007


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After dropping as low as $503 or so in after-hours trading yesterday, Google (GOOG) opened at $511.90, right on top of its 50DMA. Google never looked back and crept ever upward into the close. This bit of spunk is shown below:

Google


In my missive yesterday on GOOG's earnings, I stated that options buyers would finally benefit again from post-earnings action. At least the put buyers. And contrary to my call earlier this year that GOOG options should be sold and not bought. In the end, the sellers did win this post-earnings battle again. The near-the-money options for GOOG were laid to waste. The calls of course were obliterated, but the July 510 put opened at the same price as it closed yesterday ($2.25), the 520s provided fat profits to anyone willing to sell soon after the open. And of course the in-the-money puts 530 and higher remained profitable, but these puts supplied poor risk/reward.

I thought the sell-off could have and should have been worse given Google's earnings news relative to expectations. Today's action, with GOOG bouncing so readily off the support of the 50DMA and then the lower-BB provides some hope to the bulls that this post-earnings malaise has already found a bottom. This has happened twice before in Google's post-earnings history. To me, aggressive folks can buy here and stop out under today's low. Another group of you can wait until GOOG reconquers its all-time highs and play that break-out.

Be careful out there!

DR. DURU®, 2007