There has been quite a bit of buzz regarding this next round of smartphones. So today, we look at these two companies to see what their charts say. In a nutshell, MOT is very strong and looks to get stronger. GOOG, on the other hand, can still be held but requires tight stops. MOT can be bought here while GOOG cannot.
A quick check of the charts underlines the huge difference between GOOG and MOT. Here's the long term view of GOOG. It currently enjoys a bullish advance, but the advance is
This is not a call to short it, but it is a call to be careful if you are riding it. GOOG is not, in my opinion, a buy at this price point on a long- intermediate- or short-term timeframe. The risk-to-reward parameters simply do not work at the current price point.
The swing low from early '08 was removed a few months back, but volume has yet to swell and, from all indications, this stock will revisit those lower levels once more. You can see that volume from early '06 was huge in the $325-$475 price range. I would expect to see this stock trade back to the $400 area one again in the coming months. For long-term investors, that's the buy area.
Now compare the long-term chart of MOT, which is set up quite differently.
In this chart, you can see that MOT has been stuck in a downtrend since '06 and is only now beginning to roar back to life. MOT (the inventor of the cell phone) clearly rested on its laurels for far too long and had to reinvent itself to get back in the game.
Unlike GOOG, MOT is attacking these price levels with volume. It does have significant resistance at the $9.50-$10.35 range (horizontal and downtrend line), but once it clears that area, I would expect a quick trip higher to occur. In fact, there's no real resistance until the $15 level. That represents a 50% move.
While we are on the long term timeframe, we should also consider the general index that these stocks trade in -- the
PowerShares Nasdaq 100
On a long-term timeframe, there are issues here as well.
QQQQ has traded back to the swing lows from early '08 and has done so on declining volume. On the bullish side, it has likely eaten up some of that supply line that exists at these price levels, but it faces pressure from both overhead supply and a downtrend resistance line. Breaking and staying higher seems difficult near term. That, in turn, places selling pressure on all stocks that trade in that general market (GOOG and MOT included).
Shifting our focus to the weekly chart, here again you can see the issues that GOOG faces. It is trading at the top of the channel line coming off the March lows, and since the April time period, volume has dried up. The uptrend has become suspect.
Adding to the concerns, the recent highs (which did see a volume increase), have now been tested and have failed. If you are long this stock, this cannot be comforting.
Compare this to MOT where the volume advance literally jumps off the page at you.
Not only do you see a confirmed uptrend on this timeframe, but you are also witnessing a very strong uptrend.
Moving back to GOOG on the short-term timeframe, the parameters are clear. If you are long this stock, I am not suggesting that you immediately sell. The uptrend has actually been confirmed for now. The problem, though, occurs if GOOG trades and closes under the $520 level.
If that happens, then all bets are off. This stock has longer-term issues that will be addressed sooner or later. This is not a stock to hold if it closes under $520.
Glancing once more at MOT, the short-term timeframe shows strong support at the $7.75 level and then again at $7.
Although anything can happen in trading, it is very hard to see MOT trading below the $7.75 area on a closing basis now. Too much buying has occurred at this price level, making a breakdown unlikely.
From a swing-trading mindset (holding positions for a few days to weeks or months), GOOG and MOT remain bullish in the short term. GOOG is much more precarious though, and continues to flash warning signs while MOT builds pressure to move higher. If I had to choose one, it would be MOT hands down. The upside there is tremendous.
So, until next time, keep trading the charts!
L.A. Little is an author, professional trader and money manager who writes daily on
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