Market Structure:
After reaching a significant high on July 11, 2024, Google ($GOOG) appears to have entered a corrective phase, which is typical following an impulsive move. According to Elliott Wave Theory, this looks like a Wave 4 correction after completing Wave 3 of a larger uptrend. Typically, Wave 4 corrections are more complex and can take the form of ABC corrections, which is what seems to be playing out here.
Wave Breakdown:
- Wave A (July – August): The stock initially dropped from its high, marking the start of the corrective process. This decline was the Wave A, where the price began retracing towards the lower Fibonacci levels, indicating that the uptrend was taking a breather.
- Wave B (August Bounce): This wave usually comes after the initial decline and brings a temporary relief rally. The price bounced upward briefly in mid-August, forming what now appears to be the completion of Wave B.
- Wave C (Current): Currently, the stock is showing characteristics of being in Wave C, which is often the final leg of the correction. The price is now nearing strong support levels and Fibonacci retracement zones, between $163 to $146. These areas are critical as they represent a likely zone for a reversal and resumption of the uptrend.
Technical Indicators:
- Fibonacci Retracement: The stock has been retracing from its July high, and key Fibonacci levels between 0.5 ($155.22) and 0.618 ($146.59) are acting as important support zones. Historically, Wave 4 often retraces around 38.2% to 50%, and sometimes deeper, which is consistent with what we see here.
- Bullish Divergence on RSI: The Relative Strength Index (RSI) is showing signs of bullish divergence, especially on lower timeframes. This indicates that the downside momentum is waning, even as the price has continued to fall, suggesting that a bottom could be forming.
Short-Term Outlook:
In the short term, Google’s stock is likely to see some consolidation around these support levels. The Wave 5 impulsive move to the upside could be the next major leg, once Wave C of this correction is complete.
Key Levels to Watch:
- $146 to $155: Key support zone where a reversal could take place.
- $163 and beyond: Once the price breaks above this zone, the next leg of the uptrend (Wave 5) could be confirmed.
Conclusion:
Google’s stock appears to be nearing the completion of a Wave 4 correction in the Elliott Wave cycle. The ongoing ABC correction is approaching strong support levels, and bullish divergence on the RSI suggests that the stock could be gearing up for the next impulsive wave (Wave 5). Investors should keep an eye on price action near the Fibonacci support zones for signs of reversal, which could provide a buying opportunity as the stock gears up for the next leg higher.
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