Google (GOOG)

Business model: Indeed, Google's business model is quite attractive. The company provides its basic service for free, guaranteeing a steady and growing stream of users. Its costs are, as a fraction of revenue, also remarkably low (less than a third).

The internet is still growing in terms of users and usage. More people are spending more time online. Devices such as the iPhone are contributing to this trend. Online advertising only accounts for 10% of total ad spending. As advertising on the web continues to grow, Google stands to capture a significant amount of expenditures.

TV advertising is facing major battles. The popularity of DVR devices is leading to declines in live viewer-ship as more people are recording content to watch later. It’s very likely that a significant number are skipping through commercials while viewing their recordings. According to an IBM study, 25% of US households own a DVR device, and 53% claim the majority of their TV viewing are recordings.

In addition, the proliferation of available television channels and content has dispersed the audience around the dial. This implies that on any given channel, there are less viewers. Audience dispersion encumbers advertisers seeking a mass audience in a single place (network TV). Declines in TV advertising will result in increases in web advertising.

User-generated content, such as videos found on YouTube, are boosting web usage. The explosion of blogs, as well as more free content from the media and press, are also catalysts. Print readership - newspapers and magazines - is declining, yet online readership is growing. Advertising spending will follow audiences online, and Google is well-positioned to benefit.

Business model: Indeed, Google's business model is quite attractive. The company provides its basic service for free, guaranteeing a steady and growing stream of users. Its costs are, as a fraction of revenue, also remarkably low (less than a third).

As of 2008 Google no longer has any competition! It is expending it's operations into many other areas other than search, and will most likely start eating away at Microsoft's market share through their internet applications. Google’s share of online search is more than 65%, while Yahoo, the closest competitor, is only around 20%. Google’s share has been rising, while Yahoo’s (YHOO) has been falling. Google’s search engine is far superior to the alternatives, so much so that “Google it” has become part of the English lexicon. As the web continues to expand, search is critical for navigation, thus Google will always be relevant.

Google dominates the paid-search category, which generates high ROI for advertisers. Yahoo has been stumbling for the past few years which has allowed Google to build a sizable lead. The fact that Microsoft (MSFT) is making a bid for Yahoo is an admission that it can’t compete with Google. I don’t know that buying a company that can’t compete with Google will help Microsoft. I believe that the merger discussions are a distraction for both and are giving Google the opportunity to further increase its lead.

Google’s growth potential is just not limited to paid search. Implementing ads in YouTube videos presents another avenue for growth. The acquisition of DoubleClick will boost display advertising revenues. In addition, Google has been experimenting with online applications for software as a service [SaaS] possibilities.

Already surpass all expectations and still going on ...

Google has shown a remarkable ability to capture new market. First the online maps, the e-mail and of course the Anroid platform which is still growing at an enormous pace. Furthermore, Google is achieving great success with Google Plus which is still in developing phase. Astonishingly enough, the new social network is recruiting nearly a million users per day, despite the fact that it is restricted to invited users only. To underline the power and potential of this, a survey in the U.S. showed that 55% of internet users think Google Plus will dethrone Facebook as the leading social network. Chat-trouble for Facebook the last few months, really boosts the effect of Google's image as a set of services that function easily and properly.

The Chromebook is another example of great Google-innovation, and a cheap, amazingly fast computer is perfectly suited for the average netsurfer's need, and basically everyone who isn't an active computer-gamer or in need of running heavy programs

With the upcoming, fast growing Asian, African and South-American economies, hundreds of thousands of new internet users appear every single day, and the majority of this new traffic is directed to several Google-services.

The constant stream of innovative ideas springing out of the Googleplex leads me to believe Google will keep increasing it's revenues, and will continue to capture new markets, and continue to grow in those where they are already present

New OS for IPad will be at 1 june 2011

An entity, biological or economic, displaying internal dynamics which are inversely proportional to slow-growth, meaning that the internal complexity of the corporation is scaling at multiples much greater than the global growth rate, is a highly adaptive entity in an environment saturated by disruptive patterns such as those demonstrated by the technology markets. I would venture that when considering Google's investments in infrastructure and the global expansion of the "Googleplex", it is safe to say that the internal complexity of Google is growing quite rapidly, and as the Bears have observed, we know that the global growth-rate as a function of market-share is slowing. One study on the relationship between infrastructure investment, expansion, and complexity can be found at ( http://pwm.sagepub.com/cgi/content/abstract/4/4/274 ), and one can also find the fundamental information theory behind this concept in Steven Wolfram's "A New Kind of Science".

After one becomes comfortable with the science behind the first assertion, it follows that in regard to the adaptive efficacy of a company that satisfies the conditions discussed above, traditional valuations of profit models and market-share are poor indicators of Value growth. If the system in question, for our purposes Google as an evolving corporation, is in reality a global information-infrastructure, market-share becomes a poor indicator of long-term potential (market-share as denoted by profits from ad-revenue does not demonstrate the extensive influence of their privately owned info-infrastructure). To demonstrate this point, consider the Bears' argument regarding Google's profit-model and its near complete dependence on advertising revenue. This "dependence" is actually an indicator that something fundamentally novel is happening concerning the types of large companies that can maintain stable-growth, and I would challenge anyone to name a company that sees one-tenth of Google's revenues with a passive profit model (and I would not consider social-networking sites passive, anymore). The key idea to take from this is that by passively generating revenue in a large-scale market, Google is able to spend time and money actively contemplating and developing their strategies over longer hypothetical time spans, which focuses them on the horizon rather than the bottom line.

When it debuts, Google + will be the first publicly traded major social networking site.

They are not afraid of going into new markets, and are good at finding new solutions and eventually making it hugely profitable.

Potential for a Price Bottom in Google. This link will take you to my analysis: http://tinyurl.com/584gxw

The Google company started from modest begginings, since then the company has ballooned. Despite the company's growth - they have been able to sustain this and they don't seem to run out of new, fresh ideas. These ideas are obviously profitable and as they grow their competitors such as Yahoo, and Microsoft lack ingenuity that Google seems to reek of.

The company has good prospects in an expanding market and is gaining large market share. As long as Google keep doing what they are doing they will continue to propser.

Innovation: Google has expanded not only by cutting its costs but also by aggressively looking for new products, improving old ones, and enhancing the quality of its searches. Although the company has seen tremendous growth, its business plan looks to the long run. As a part of this plan, Google is planning to plunge into the wireless communication market(mobile) and social networking which are amongst the most promising fields today.

Google's new era of software development that includes Gears, Android, App Engine, Web Toolkit, and OpenSocial API. Arguably, it all (the future, natch) belongs to Google -- "In a landscape littered with potential Google rivals, it seems premature to declare victory. But as Google and the Web become ever more interdependent, it becomes harder and harder to bet on another horse."

The people who pigeon-hole Google are likely the same people who misuse the word "titan" -- you know, as in business titan. They forget, if they even ever knew, just who were the Titans. And if they did know, or could recall, they would not misuse the term as they do, casually tossing it about. Unless its use were explicitly accurate.

The Bearish perspective on Google's slow-growth stems from a fundamental misunderstanding regarding the very concept of slow-growth and what it implies. Their perspective stems from a frame of reference that has not yet incorporated the many verifiable facts of evolutionary economics. From this alternate perspective (one outlined well in Wall Street terms by Eric Beinhocker, of McKinsey & Co., in his book "The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics". See: http://www.mckinsey.com/ideas/books/originofwealth/index.asp ) slow-growth and high market-saturation is in actuality a wonderful indicator for those interested in value investing. There are many reasons for this, but the most important are:

Dynamic Stability

An entity, biological or economic, displaying internal dynamics which are inversely proportional to slow-growth, meaning that the internal complexity of the corporation is scaling at multiples much greater than the global growth rate, is a highly adaptive entity in an environment saturated by disruptive patterns such as those demonstrated by the technology markets. I would venture that when considering Google's investments in infrastructure and the global expansion of the "Googleplex", it is safe to say that the internal complexity of Google is growing quite rapidly, and as the Bears have observed, we know that the global growth-rate as a function of market-share is slowing. One study on the relationship between infrastructure investment, expansion, and complexity can be found at ( http://pwm.sagepub.com/cgi/content/abstract/4/4/274 ), and one can also find the fundamental information theory behind this concept in Steven Wolfram's "A New Kind of Science".

The Irrelevance of Standard Valuation

After one becomes comfortable with the science behind the first assertion, it follows that in regard to the adaptive efficacy of a company that satisfies the conditions discussed above, traditional valuations of profit models and market-share are poor indicators of Value growth. If the system in question, for our purposes Google as an evolving corporation, is in reality a global information-infrastructure, market-share becomes a poor indicator of long-term potential (market-share as denoted by profits from ad-revenue does not demonstrate the extensive influence of their privately owned info-infrastructure). To demonstrate this point, consider the Bears' argument regarding Google's profit-model and its near complete dependence on advertising revenue. This "dependence" is actually an indicator that something fundamentally novel is happening concerning the types of large companies that can maintain stable-growth, and I would challenge anyone to name a company that sees one-tenth of Google's revenues with a passive profit model (and I would not consider social-networking sites passive, anymore). The key idea to take from this is that by passively generating revenue in a large-scale market, Google is able to spend time and money actively contemplating and developing their strategies over longer hypothetical time spans, which focuses them on the horizon rather than the bottom line.

Business to a Different Drum

The debate surrounding Google's future is a microcosm of the more fundamental debates pertaining to information economies. As we begin to integrate our new understanding of dynamic systems into the torturously non-predictive state of contemporary economic theory, new perspectives on Value and growth-potential will not only vindicate Google's more hotly debated investments, but will in fact prove an integral factor that will influence their ability to adapt to growth cycles in such a manner that minimizes the effects of an increasingly volatile economic sector. One demonstration of this increasing volatility exists as the decreasing lifespans of information-age companies (see: "Why Most Things Fail" by Paul Ormerod http://www.volterra.co.uk/paul.html ), which also highlights the leverage given by Google's functional form as discussed above. The fundamental point here is that only in a large-scale company that demonstrates rapidly increasing and internally ordered complexity, is it possible to maintain not merely controlled, but directed growth in today's (and more importantly tomorrow's) economically lethal environment. It is these very properties that lead to the slowing growth-rate commented upon by the Bear perspective, which is, ironically, the very property that makes Google an extremely sound investment.

As a general conclusion, Google's business model allows them to effectively mold the information-architecture of the globe. The sheer size of the communication channels owned by Google is astounding (first corporation in history for which the speed of light is a salient impediment to efficiency), but most importantly their business-model allows them to passively generate consistently increasing returns while they actively focus their attention on creating a fertile infrastructure for the Information Economy of the 21st century. Basically, Google is seeding the very soil that the rest of the world will build upon, and its always great to own land.

Talk about branding?

Can you think of any other corporation whose brand name has become THE VERB to describe the service it offers?

"If you can't find it, just Google it up"

Yeah gads! Do you have any idea how much money it would take another company to make their brand name part of the everyday lexicon of their market?

They've done everything right, and that brand/verb connection shows us just exactly how right, too.

Google would have probably hoped and preferred Microsoft would focus its attention on this proposed buyout and merger, if successful, for as long as possible. This would clear the way for Google's continued successes. And a widening lead ahead of its primary competitors.

Sure, Microsoft and Yahoo are also-rans in online advertising, but as the space grows so rapidly, there remains room for several worthy competitors to keep the game... honest. Distressingly, I learn that Google's reliance on algorithms rather than humans irritates many of their clients and even their advertisers -- albeit, of the mom & pop variety -- who decided to spend their advertising budget elsewhere; a reality that seems to trouble Google little, if at all. Yes, as corporate advertisers (especially those companies with a national footprint, and thus huge advertising budgets) move online, attracted by the comparatively low CPMs, Google's revenues remain sky-high. And growing.

The numbers: By any measure Google has been a fabulously successful company, growing rapidly and maintaining incredible margins. It's hard to argue with a 70% profit margin.

On 17th Apr 08, Google proved the hand-wringers wrong by reporting Q1 earnings and revenue growth above expectations. It was the 12th time in 15 quarters as a public company that Google beat estimates.

Data from ComScore (SCOR) showing Google's ad clicks to be slowing missed a key reason why. Google deliberately limited the volume of commercial links so it could serve up more compelling messages creating actual sales. Google gambled that advertisers would be willing to pay more for each ad link if doing so created more revenue with fewer clicks.

According to the first quarter's results, that gamble is paying off. ComScore should adjust the way it delivers its findings. It claims to have never passed judgment but just reported a slowdown in clicks, but reporting a slowdown without providing context made Google's situation look bad when it was actually good. If the purpose of reporting clicks is not to understand the health of the business, then what's it for? Understanding that the quality of clicks is as important as the sheer number of clicks seems like a key part of ComScore's job, and one it messed up. Little surprise, then, that its stock fell 8% on Google's strong report. ^[1]

1. ↑ http://www.jasonkelly.com/2008_04_01_blogarchive.html#5538481216922366564

The debate surrounding Google's future is a microcosm of the more fundamental debates pertaining to information economies. As we begin to integrate our new understanding of dynamic systems into the torturously non-predictive state of contemporary economic theory, new perspectives on Value and growth-potential will not only vindicate Google's more hotly debated investments, but will in fact prove an integral factor that will influence their ability to adapt to growth cycles in such a manner that minimizes the effects of an increasingly volatile economic sector. One demonstration of this increasing volatility exists as the decreasing lifespans of information-age companies (see: "Why Most Things Fail" by Paul Ormerod http://www.volterra.co.uk/paul.html ), which also highlights the leverage given by Google's functional form as discussed above. The fundamental point here is that only in a large-scale company that demonstrates rapidly increasing and internally ordered complexity, is it possible to maintain not merely controlled, but directed growth in today's (and more importantly tomorrow's) economically lethal environment. It is these very properties that lead to the slowing growth-rate commented upon by the Bear perspective, which is, ironically, the very property that makes Google an extremely sound investment.

As a general conclusion, Google's business model allows them to effectively mold the information-architecture of the globe. The sheer size of the communication channels owned by Google is astounding (first corporation in history for which the speed of light is a salient impediment to efficiency), but most importantly their business-model allows them to passively generate consistently increasing returns while they actively focus their attention on creating a fertile infrastructure for the Information Economy of the 21st century. Basically, Google is seeding the very soil that the rest of the world will build upon, and its always great to own land.

One of my friends runs a web site that runs Google AdWords on it. Last week he got an e-mail where Google was pointing out a "slight" change in their privacy policy. From now on Google will present ads that aren't only textually targeted but also behaviorally targeted. This means that when you arrive at any site that runs Google ads, Google may show you ads based not on the sites content but on your browsing history (!!) Google give the example that if you enter a lot of sport sites (And Google has you cookied and knows it) they may now hit you with a sports ad, even if you're on a financial blog.. I'm sure a lot of us can think of "less graceful' examples of this service. This, to me, means two things: 1. Google is testing the limits of privacy - though they claim that data collected in Non PII (Personally Identifiable Information), making a connection to the actual person is pretty easy. Given that last year Google sold out a couple of Chinese journalists for the sake of greed, it makes sense that we will soon hear of others busted by the feds in cooperation with Google. 2. Google ad revenue will go higher. There is no doubt this kind of advertising will be far more effective, so expect more revenue increases for this giant.

Google (GOOG) just now reported a solid 4th quarter (GOOG Earnings Release). Revenue after Traffic Acquisition Costs were $4.22 billion and EPS $5.10 - beating analysts consensus of $4.12 billion and $4.95. Shares are up a bit in the after hours. More importantly, Google Inc. (GOOG) has an $8.6 billion pile of cash that will only be used for “very very conservative investments,” Chief Executive Eric Schmidt said in an interview with The Wall Street Journal. The primary plan is to let the cash “pile up” as the company tries to retain its footing during the global financial crisis.

From a valuation standpoint, Google is very attractive and, like Microsoft, strikes me as being priced for a severe recession. They have $50 a share in net cash and short term investments on their balance sheet. So you get the business for about $250 a share. They earned $19.49 a share in 2008 for a trailing multiple of 13. Even if net income is flat in 2009, a 13 forward multiple for a category killer like Google in a huge growth industry is tremendous value..

When I am considering a stock for investment, I want to think I am not buying a company or even a product. What I am buying is positioning. One way of defining positioning is the space that the combination of functional and emotional values of a brand occupies in the perceptual map consumers have of any specific category. That perceptual space will sooner or later translate to sales. The bigger the space, the more sales that brand or product will generate, and for a longer time.

You want to look for brands that occupy a very big and/or growing space in a large and/or growing category. Also, the bigger the space the brand occupies, the less space is available for the competitors, therefore adding longevity to that brand’s business potential.

Now, let’s talk of a very specific example: Google (GOOG). Online search is a very big category. We all live around the Internet nowadays. From finding out about the weather today, to planning our next vacation, to –yikes!- checking the financial news every 20 minutes to try to make sense of the madness we are living in these days. Now, how do we say when we suggest someone to do a search in the Internet? I haven’t heard anyone telling me to “yahoo” something. Nobody has ever mentioned that they found their long-lost third cousin while “Microsoft-living” his or her name on the net. We all “google” our information. Google occupies a huge space in the mind of the consumers when they think of finding information in the web. Google is the positioning leader in the all-important online-search category and they keep working relentlessly to make that space even bigger. In the meantime, Yahoo (YHOO) is struggling for survival and trying to re-kindle their affair with Microsoft (MSFT), while the latter is still figuring out how to convince the world that Vista is not the dud it is.

Advertisers know that. Heck! So do you! I guess that’s the reason why Google was commanding such a rich P/E, right? And then the recession comes, and with all its doom and gloom, we assume advertisers will cut their budgets, people will stop searching, and then we send Google to its lowest price in three years. To that, I want to highlight a few things:

- In a tough economic situation, advertisers indeed cut their advertising budgets. But they don’t eliminate them. You can’t afford to. You need to keep selling! If any, you re-direct your reduced budget to the most effective touchpoint you have available. If you had campaigns going in Google, Yahoo and Microsoft, you cut the last two and put all your money behind Google. That is a fact.

- Consumers stop buying. But they keep shopping. It is part of the coping mechanism. More than half of the thrill of buying something is actually shopping for it. We all make hopeful plans of what is that we would like to buy once our portfolios rise again from the underworld. And Internet searching (with its payable clicks) will continue to be the prime means to do this.

- When the going gets tough, the tough get going. This economic crisis will only consolidate Google’s leadership in the web search space. It is the only company in the space with the resources and the strength to thrive in these conditions. You will see smaller rivals (including Yahoo) retrenching and cutting back in their investments. Google will keep plowing ahead, taking advantage of the situation to consolidate its dominance.

When you consider that Google can only consolidate and strengthen its position as the absolute leader in a category with a double-digit compounded growth in the foreseeable future, I would say $270 is a small price to pay for such a Company. It is not about what could happen in the next few months. It’s about owning the Internet for the next decade! And that is a very, very big space.

Google has a tremendous advantage over other players in its space--its sheer quantity of fantastically smart people. They've been able to maintain a position in the minds of the smartest workers and researchers out there.

For this reason, coupled with their proven organizational abilities and strong culture they've been able to maintain, they're likely to continue to outpace the vast majority of companies in terms of innovative products, and in terms of the quality of their core products like search and ads, for at least several years.

The Cliq phone by Motorola will be one of the new phones running on the Android software platform. Best feature is it's ability to multi-task. It will allow users to access many different social networks on the same screen. Whooa! Let us know what you think?

The numbers: By any measure Google has been a fabulously successful company, growing rapidly and maintaining incredible margins. It's hard to argue with a 70% profit margin.

A beautiful BUY pattern gave a BUY signal on 9/10/2008. One would have entered a long position at or near the close of 9/11/2008 at a price of about $414.16 . The target price is $461.90. Set your limit order to exit at $461.90 or above. Truly a nice pattern. I wish I could display it on a wickichart. If you want a description of the patterns I am talking about, take a look at http://www.wikinvest.com/image/LUV_BUY.jpg and you should be able to see all the components of the pattern.

But first, to see what the picture looked like on the day of the signal (9/10/08), here is the chart with the last bar being the BUY signal generator (see the red upward triangle below the bar).

Would you have thought of buying GOOG at that point, despite the buy signal? Well, here is what the whole picture looks like:

Here is the analysis: As per the article specified above ( http://www.wikinvest.com/image/LUV_BUY.jpg ), we can see the 4 components of the pattern:

1) We have a downward movement (shown in the red rectangle) from $588.04 to $461.90 followed by:

2) A retracement of exactly 38% on 8/18/08.

3) A resumption of original downward movement from 8/18 until 9/10

4) Then there was a bounce off the $413.75 showing support at that price which is also the 38% extension of the original downward movement shown in the red rectangle. It is that last piece which generated the BUY signal. Based on the rule of the pattern, you have a very high probability that the stock will now reach the target price which is calculated to be the bottom of the red rectangle. That price is $461.90.

We hit our target on 9/19/08! But not only did we hit our target, the high for today was $462.07, only 17 cents over the target price! In fact we opened by gapping up $21.95 from yesterday’s close. The opening price was $461.03, just $0.87 below the target. Isn’t it interesting that on a day when the DOW went up $368.75, GOOG opened up and spent the day going down after hitting its target. This also represents an 11.53% gain in 9 days (or 7 bars) ! And it was all predicted by a pattern! What could make this look even more like a prophetic prediction? How about seeing GOOG go down or sideways for the next few bars? It happens often with these patterns that after hitting their target price, the stock starts going the other way.The beauty of the GOOG pattern is that it is almost TEXTBOOK PERFECT!

And remember, the BUY signal was given on 9/10/08, at a time when GOOG had gone from about $588 to about $415 or a drop of $173 or nearly 30% in just 2 months! would one have been willing at that point to say, "let's buy GOOG, it should go up 11%"?

Another observation is in order. Note how GOOG had been steadily going down starting on 8/18/08.

Of the 17 bars following after 8/15/08 only 3 are green (indicating an up day). In fact on 9/10/08 you could have looked back and seen that the last 8 bars were red, declining bars. Therefore we had quite a downtrend starting on 8/18/08. GOOG went from a high of $510.66 on 8/15/08 to a low of $409.68 on 9/10/08 for a decline of $100.98 or nearly 20%. But as soon as we bounced off the 38% extension level of $413.75, just like magic, we started having nice, green bars representing up days. In fact, the next 6 bars saw 5 upward bars. The only red bar in that sequence was 9/17/08 when the DOW had a 446 point drop.

But the pattern's prediction was correct. Look at how we hit the target perfectly! Having GOOG go over the target by 17 cents when the target is $461.90 represents an overshoot of only 0.04%. I don't know about you, but I find it impressive. Also, look at how cleanly we hit and then bounced off the 38% retracement level during the period of 8/15/08 - 8/18/08. Again, a textbook example of the Jeanty Buy pattern.

And for those who still might think that this is an isolated case. Look at the Jeanty Buy Pattern that generated a BUY signal on 7/21/08 for GOOG. Here is its picture:

Can you see the 4 components of the pattern? Again:

1) A downward movement (red rectangle) from $591.19 to $501.10 or a decline of $90.09 (or 15.23%).

2) Followed by a retracement of, surprise, surprise, nearly 38%. The 38% (to be mathematical exact we look for 38.17%) level is at $535.49. Look at the big green bar on 7/16/08, you will most likely need a magnifying glass to detect the $1.01 by which it overshot the 38% retracement level. (that's just 0.1%). On 7/17/08 we bounce again against that retracement level. This is evidence of resistance at that level.

3) We then resume the downward trend after 7/16/08 until 7/21/08

4) 7/21/08 is when we bounce off the 38% extension level at $466.71 and find support at that level.

All components of the pattern having been shown we get our BUY signal with a target price being the bottom of the red rectangle or $501.10. Assuming the position had been entered at near the closing price of 7/21/08 ($468.80) this could be a potential gain of $32.30 or 6.89%

What happened next? The downward movement was stopped just long enough for GOOG to go hit the target on 8/11/08.

And look at how the target was hit. The target was $501.10 It was reached on 8/11/08 when the high was 508.88 and the close was $500.84. We overshot the target by $7.78 or 1.55% and then closed 26 cents below the target. It is as if we were homing in on the target. We overshoot it and then come back towards it and close just .05% away from it.

A few bars after this, GOOG started going down again forming the next Jeanty pattern which was described earlier in this article.

Would you like to see what the sequence of patterns looked like? Here it is:

You can see how, in the midst of a 30% drop in the stock price of GOOG you could have taken advantage of a 6.89% gain followed later by a 11% gain.

You can also see how the patterns are connected to one another. As one pattern was reaching its end, another had already started.

Now, if only someone could explain the WHY of these patterns :)

And this is the power of technical analysis.

Well, here we are on 9/22/2008 and, surprise of surprise, GOOG is backing off the target after hitting it on 9/19/2008 Here is the picture:

Look at the dramatic drop. Again, look at how well we hit the target and then backed away from it. Tell me this is not beautiful!

It is now October 16, 2008 at 11:22 pm as I add to this article. Google had another buy signal from a Jeanty Buy pattern on October 8. The target price was $380.71. Here is the chart.

Again you can analyze the pattern and see the 4 phases:

1) The downward movement from 8/25/08 to 9/29/08 as the GOOG's price went from $497.00 to $380.71

2) This was then followed by a retracement of 38%. If you look at what the 38% retracement value was computed as you would find the price to be $425.10 on Sept. 30, Goog's high price was $425.08. That is just 2 pennies below the 38% retracement level. That is good enough to count as a bounce off the 38% retracement level

3) There was a resumption of the downward movement.

4) Finally there was a bounce off the 38% extension level on 10/8/08. This created the BUY signal with a target price computed as the bottom of the red rectangle, namely $380.71

What happened after 10/8/08? 3 days later on 10/13/08 Google's high was $381.95! We hit our target and overshot it by $1.24. This is an overshoot of 0.33% only. This would have given you (assuming you bought at the closing price of 10/8/08 of $338.11) a gain of $42.60 or 12.60% in 3 days. After that, GOOG went down for 3 days (as of this writing).

If you want to see the 3 patterns in one chart, here they are:

Tell me this isn't beautiful!

Again, the power of the pattern. Note how Goog has shown 3 of these patterns in just over 3 months.