Many people use the New Year as an opportunity to make resolutions and set goals for themselves. Some consider the New Year as a chance to “start over.” The market however, does no such thing. The dominant trends and news from last week doesn’t just go away because a new year is upon us. So while there can be a new found sense of focus and feel good vibes that come along with a new year, it is important to not let these emotions sway your decision making. Especially in a market place that eats emotions for breakfast, lunch, and dinner.
We expect the market to provide some answers soon. Since lows and high of October, key sectors and indexes have put in a series of higher lows and lower highs. These are a contradiction in nature as the higher lows are bullish but the lower highs are bearish. So as best we can conclude, the first step for a breakout is a move above the December highs. Vice versa, the first step for a breakdown is a move below the December lows. In between the December range we are in just that, a range.
While the market has been range bound lately there is one mega-cap stock that has marched to the beat of its own drum: Google (GOOG). Since the Summer of 2009, GOOG has traded in a wide range between $475-$640ish with a brief stint below $475 in the Summer of 2010. In contrast to the market and other tech stocks (like AAPL & AMZN) that have enjoyed healthy gains since 2010, GOOG has been flat (GOOG came into 2010 @ $625).
GOOG now appears as if it is breaking out, not only relative to the market, but relative to its other technology peers as well. The stock closed out 2011 at 52 week highs and above the top end of its 2&1/2 year range. To us this bodes very well for GOOG as it has had over 2 years to consolidate and prepare for this breakout. GOOG now looks ready to emerge as the tech stock to own throughout 2012 as it seems poised to test its all time high around $715. We suggest buying in the money calls expiring 1/21 on dips in GOOG which reports earnings on 1/20.
Tuesday
1000 am ISM manufacturing (Dec)
1000 am Construction spending (Nov)
0200 pm FOMC minutes
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