Google (GOOG) Going to $600

A little over a year ago I went to one of those free trading seminars provided by companies that want you to sign up for their coaching or training.

The concept they were teaching was day trading and so it did not interest me very much, but a couple things the speaker said were very interesting. The guy’s name was Tom Busby.

He said that once a stock breaks a hundred $ level for the first time it zooms up 10%.  For example, once a stock breaks through $100 it is going to $110. When it breaks through $200 it is going to $220, etc.

I had heard this before somewhere so I started looking it up. It turns out that Jesse Livermore mentioned this in one of his books. Livermore was probably the best trader of all time.

So now with two reference points I decided this was something worthy of looking into. So I started doing some research.  It turns out, that this theory/rule is true.

I checked with over 40 companies that broke through either $100, $200, or $300 and  84% of then did eventually hit $110, $220, or $330. The average time it took was 4 months. Some did it much faster and the slowest took 8 months, but it got there.

One thing I noticed is that this does not work all the time. It works only in bull markets. And this was also a limited sample.

If this theory holds, then Google (GOOG) is poised to hit $660, and Apple (AAPL) is going to hit $220. As I write this, Apple (AAPL) is already above $209 so $220 is not much of a stretch.

How should you play this?

1. You can buy the stock and wait.

2. You can buy a call option on Google (GOOG) at 660 with at least 4 months of time left to expiration.

3. You can sell puts month after month until Google (GOOG) starts to decline.

All 3 methods have their pluses and minuses. I am already long the stock, and have sold the Jan 560/570 put spread. As long as the bull market stays intact, I can sell more puts.  When Google (GOOG) breaks below the 50 day moving average, I plan on selling my stock and looking for another company to play.

Buffet Splitting His Class B Shares

Warren Buffett’s Berkshire Hathaway has set the date for a shareholders meeting related to its planned acquisition of Burlington Northern Santa Fe.

In a preliminary proxy statement filed this morning with the SEC, Berkshire gives notice that a special meeting of shareholders will be held at 9:30a on Wednesday, January 20, 2010, at Omaha’s Holland Performing Arts Center.     

Shareholders are being asked to approve a 50-for-1 split of Berkshire’s Class B shares, without splitting the higher-priced Class A shares.

That split would bring Class B shares down from about $3300 each (at today’s price) to roughly $66 each.

In an interview with CNBCjust after the Burlington deal was announced about a month ago, Buffett told us:

“I’m not big on stock splits. But by having this split, it enables anybody that has as little as one share of BNSF to opt for the tax-free exchange… So those small shareholders can have exactly the same availability that otherwise would only have been available to a big shareholder.”

So what?

Well in my opinion this is good news for option sellers. Why? Because Berkshire is a good stable stock. Not volatile and now well priced to sell options on. I am going to be keeping an eye on this one. Who knows? It might become on of my favorite stocks to do income strategies on. Time will tell.