GOOG stock has been unusually subdued over the last 3-4 weeks which could mean it is ready to make a big move.
This is a stock that is generally pretty volatile and has a history of making big moves in a short period of time. Since May 8th, GOOG has traded in a very narrow 19 point range between 525 and 544.
Looking at the chart there are a couple of things worth noting:
- RSI has been very much range bound since early May
- Bollinger Band Width is at the lowest levels seen in the last 6 months.
- There is clearly defined resistance coming in around $565
- Primary support is clearly recognizable at the $520 level
- Secondary support comes in around $490
With GOOG stock trading sideways over the last month, it’s reasonable to assume there may be some greater movement coming in the near future. Which direction is anyone’s guess, but savvy traders can use credit spreads to take a directional view on the stock.
On the bullish side, credit spread traders could look at spreads slightly below the primary support. Currently the 510-500 July 17th bull put spreads looks like this:
Premium: $1.60
Capital at Risk: $8.40
Potential Return: 19.05%
Bearish traders might construct a bear call spread assuming that resistance at $565 will hold. Currently the 570-580 July 17th bear call spread looks like this:
Premium: $1.85
Capital at Risk: $8.15
Potential Return: 22.70%
Which way do you think GOOG stock might move and how are you trading it?
Click Here For My Top 5 Technical Indicators
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
