With the market sell off today Google, GOOG offered a great example of a simple stock trade you could have made utilizing intraday analysis. There are in fact three screenshots below, and just like the CME Stock Trade Google is similar in that the screenshots tell the story. The basis of this trade is centered around the 50 day moving average.
First Screenshot, Playing Support
Google hits a fresh bottom at approximately 1:53 PM EST of $671.30, and is down 2.59% on the day. What is critical here is that the 50 day moving average, or 50 MA, is $671.12 so we should expect a bounce here. The way you play this is you buy your position and immediately place a stop just below the low of the day or $671.30, and set an initial target price of say $678 (.5 – 1% higher than your purchase price). The whole purpose is to buy off the 50 MA support in hopes of a quick run up. In the next screenshot you will find out we would have been stopped out, but a better play came along.
2nd Screenshot, Fresh Lows Offer Opportunity
This next screenshot taken at 3:07 PM EST shows us we would have been stopped out for a split loss on our original buy at the 50 MA (read above for details). Why I took a screenshot here though is I saw Google at fresh new lows on the day and the stock was oversold on the MACD which is the 3rd horizontal box down on the chart. Our next opportunity is to buy Google here at about $664 and look for the stock to climb back to its 50 day moving average at $671ish which is our target price. The reason we set it at $671 or the 50 MA is simply because on big days with strong price volatility stocks that tumble below their 50 MAs intraday will tend to rally back towards them atleast once. Our new stop loss would be placed at say $662 to give us a bit of room and setup a good profit vs loss ratio.
3rd Screenshot, Play Pans Out For Google Profit
This third screenshot taken roughly 30 minutes later at 3:39 PM shows us we were correct and Google did in fact rally back to its 50 MA. The stock was at $672.57 at this time and with our buy at $664 we could have sold for a quick 1%+ profit. Even after getting stopped out on the first failed trade earlier we still would have yielded a roughly 1% profit between the two trades. Following this Google did sell off back below $670 and ended up closing at $669.23, or just below its 50 MA.
Further Education on This Post
This play was centered around first the 50 day moving average. The second screenshot tied in the MACD technical indicator and stock volume was also brought in as well. Understanding stock charts is actually not that difficult, and when it comes to day trading, utilizing a well setup profit versus loss ratio is the big key to success. (Side Note: These charts come from my account with TD Ameritrade who is a top stock broker)