From a fundamental perspective:
1. Google is a mature company in an industry of questionable growth potential. While the company is in a league of its own, its league -- CPC/CPM advertising -- is on the way out, and Google's size and maturity hinders its ability to adapt accordingly. I expect new ad networks and publishing networks to slowly eat away at Google's primary revenue source -- text link advertising -- while revenue from text link advertising declines due to macroeconomic woes. New ad networks that can find ways to deliver engaging promotional material without relying on CPC/CPM pricing fit into the context of a disruptive innovation, in that they compete on a dimension that the incumbent -- Google -- cannot compete on. Specifically, something like a gaming company that offers in-game advertising, is the kind of model that could disrupt Google's position as emperor of online advertising.
2. The company's P/E ratio is currently at 30.87 -- the average of the S&P 500 is currently 16.93, according to Robert Shiller. As bears do what they do best -- put the smackdown on overvalued assets -- I expect Google's P/E to fall noticeably, so that it is closer to the S&P 500.
From a technical perspective:
The daily chart is interesting. While volume is low -- attributed to seasonality, and the lower volume that typically comes with August -- we do see a doji candle from several days ago. We also see MACD just turn bearish, which could signal the onset of a new short-term bear trend.
The weekly chart is a bit more sobering for permabears, and suggests bears may need to wait a bit longer before dining on bulls. A rising wedge suggests the market is still bullish on Google, and MACD remains bullish.
Ideas for Trading Google
More conservative bears may wish to wait for a pullback to the upper trendline on the weekly chart, which would happen at around 500. However, such a pullback may not occur. Alternatively, bears may wish to short now, with a protective stop loss order right above the high of Monday's candle which gapped down. The target profit would be the trendline drawn on the daily chart. This would only be a risk/reward ratio of 1:1, so perhaps not the best trade. However, if we are ready for the next leg down, we may see a break below that trendline. As a result, traders who scale into positions may wish to enter some now, and add to their position on a close below the lower trendline.
Disclosure: No position.
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