Google

It looks like GOOG is back to its long-term trendline ....it just happens to be on the other side of it. Since Aug '05 Google has been bouncing along nicely on this trendline (click left to enlarge). That is, until the end of Jan '08.

Fast forward, Google has now climbed back, quite impressively, but it is also up against its previous support line and as such, may face some heavy resistance.





If you like the chance of a pullback here, start with a realistic price target. In this case, I think it's reasonable for GOOG to pullback to at least one of its moving averages, so let's call the target 550/560. Plus, to protect your downside risk, I would put a mental stop in the low 600's (above its old long-term trendline). The trade calculator (right) makes easy work of analyzing this, showing the break-even point and maximum risk/reward.

Trading outright options on Google can be quite expensive. And credit spreads on Google can be dangerous for the simple fact that the strikes are 10 points apart. This suggestion focuses on a debit spread which is much more affordable. Another benefit of debit spreads is that IV is less of a concern. The idea is that even if IV is high and you get stuck buying overpriced options, you conversely get to sell overpriced options and it's a wash. This isn't guaranteed protection but it often works.