Tough times are predicted for Google (NASDAQ: GOOG), as the European Union confirmed that it will officially press charges against the company for breaking anti-trust rules within its territories.
This is a considerable issue for the company as it will drag on its share price for as long as the trial lasts, and trials usually take their time. The company has ten weeks to formally respond to the charges, however, it has already denied that any rules were broken.
The news comes at a challenging time for Google as they push for a change in their search algorithm. The new version of the algorithm will prioritize websites optimized for mobile devices in search results and was launched on the 21st of April 2015.
Mobile devices are now more popular than ever, with usage growing year on year. Mobile devices also contribute to more than half of google’s search inquiries. The change in the algorithm is undoubtedly a move for the better, and an evolution for the search engine.
This move is expected to trigger some complaints from webmasters and online businesses that rely on natural search engine rankings. If penalized and dropped from the coveted page #1 for example, sales will definitely be affected as web users rarely read beyond page #1’s results.
In this type of situation, communication by the company is the key. The well-kept secret of how the algorithm works is vital for Google and the share price was expected to suffer.
So far, the share price fell to lows of 521 on the 17th April, and in doing that it formed a triangular formation that from my point of view will turn into having bearish implications. Such a triangle appears either as a continuation pattern or as a reversal one, and it depends very much on how the price structure prior to the triangular formation looks. In this case, it looks bearish, so a continuation pattern is most likely the right interpretation.
This means I am favoring a put option on the GOOG share price but not from current levels as I am looking for more confirmation.
The confirmation should come by the time the higher lows series is broken and this means that by the time market is breaking the 522 mark it should give us the best possible striking price for a put option.
As for the expiration date, I would go with the end of the month as it depends very much on when that break arrives. If it happens by the end of April, then wait for May to start before buying the put option.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
