Steve wanted me to take a look at Google. Monday, in the DaytradeTeam trading room, I said that I thought it was destined to hit $500 in short order. Once it broke the old all-time high of 475, I figured that a short squeeze could easily push it several percentage points higher to the $500 level. I didn’t think it would get this close to 500 quite this fast but here we are.

The million dollar question is what happens after it hits $500. My guess is that it will probably run to $500, do a nice upthrust just to trigger all the stops at that level and then pull back. The stock is very extended right now as evidenced by the fact that it’s well above its upper Bollinger Band. That’s not the place to put new money to work. I’m not suggesting that it’s a sell here — and certainly not a short — just that I wouldn’t try to chase it higher right now.

What I’d like to see is a few days of a lower volume dip / consolidation which would bring GOOG back under the the upper Bollinger Band. I’d also like it to hold above the old high of $475, which should have now turned from resistance to support. I’d also like to see stochastic drop towards neutral levels.

The chart above was a short term view of GOOG but the longer term daily chart below shows an interesting bearish divergence in On Balance Volume. The volume action has be very concerned that $475 will not hold on the pullback. I never like to see new highs on just so-so volume and that’s exactly what GOOG is showing now. If the volume was over 20 million shares for a couple of days this week I’d feel much better about this push into new high territory.

Again, I’m not saying it’s a sell but I really want to keep an eye on the volume over the coming weeks. The action now smells like nothing but a short squeeze to me as opposed to “real” buyers pushing it higher.