A Daily and Weekly View of Goldman Sachs GS

Jan 7, 2009: 12:43 PM CST

I wanted to highlight Goldman Sachs (GS) as it is in a structurally similar position to Caterpillar (CAT) which I mentioned in the previous post.  Let’s see the confluence support below and possible resistance above and watch price closely for a break.

Goldman Sachs (GS) Daily:

Goldman Sachs broke an ascending triangle to also break resistance via the falling 50 day EMA, a remarkably bullish development given the current climate, and we’re at the precipice of finding support on a retest of the daily 50.  Also, there is quite significant support about the $80 per share level, which comes in from the rising 20 day EMA and the horizontal trendline (resistance once broken becomes support) of the ascending triangle.

Should price break beneath $80 per share, it would be a remarkably bearish development and would trigger an aggressive short-entry (and stop-loss of any long positions).

For now, it would appear the $80 level should be expected to hold until proven otherwise.

With this bullishness developing on the daily chart, let’s see if there might be any contradictions on the weekly chart.

Goldman Sachs (GS) Weekly:

Just like Caterpillar (and many more stocks, I suspect), we hae significant potential resistance overhead.  First, the falling 20 week EMA registers right at $100 per share, which would be an important test, and in addition, the 38.2% Fibonacci retracemetn of the May/July consolidation highs to the November lows comes in at roughly $101.00 per share, adding a signficant confluence resistance zone about the $100 per share level.

As if that wasn’t enough, it appears that price is forming some sort of rising wedge or bear flag pattern into this resistance zone.

If we could break above  $100, it would be a major accomplishment but it would seem the odds favor perhaps a test of this level and that it should hold, meaning a short-sell entry is potentially coming up.

Continue to watch GS closely – if only from an educational standpoint – for any additional clues as they develop.

Corey Rosenbloom
Afraid to Trade.com

14 Comments

14 Responses to “A Daily and Weekly View of Goldman Sachs GS”

  1. piazzi Says:

    Corey,

    one difference,IM very HO:

    the waves structure of GS’s advance looks rather corrective to me at this point, CAT, on the other hand can pass for an impulse

    so far

    Not saying one, or the other cannot go higher, just an observation.

    Thaks for profiling them, good trade ideas

    regards,

    piazzi
    http://markettime.blogspot.com/

  2. Corey Rosenbloom Says:

    Piazzi,

    I mainly highlighted these from my scans because of the interesting ‘tension’ or conflict from the daily and weekly chart, and because the resolution should be interesting.

    I would say they’re both corrective – perhaps 4th wave moves – especially given that so much is correlating in this environment.

    I probably wouldn’t enter now but at the break of one of the zones, it might signal a good continuation trade.

  3. piazzi Says:

    Corey,

    I was just referring to the structure of the current advance, the one on cat can be counted as a 1-2-3 so far, and, of course, a-b-c

    no I would not touch them either, but they look like good potentials

    I am not sure why I got double comments ??!

  4. Corey Rosenbloom Says:

    And they got trapped by the spam catcher – I had to release them.

    Now that you mention it, it does look like CAT is having a good 3rd (fractal) wave right now after the 1 and 2. But it could be part of a complex correction that doesn’t look as clean as GS. I’m still training to identify corrective phases better and generally defer to the experts on interpreting those. It’s still not as easy as it looks at first glance.

  5. Dominick Says:

    Hello Corey. When you have a contradiction between the daily and weekly chart patterns, which timeframe is more likey to rule? Short term or long? How would it affect a trading strategy.

  6. Dominick Says:

    Corey I just read the Cat post and I think I have my answer.

  7. Corey Rosenbloom Says:

    Dominick,

    Often the higher timeframe dictates the action thanks to the bigger players seeing the strength as a chance to ‘get short again’ which is often the case. It takes a great deal of force to reverse a trend so it is assumed to be dominant until officially reversed.

    When you have conflicting signals, you would take a reduced position – if any at all. Might want to move on to another stock(s) until the pattern resolves and price breaks one way or the other.

    It would just tell you to be cautious and not get aggressive… and to always check the higher time frame before getting excited.

  8. Reggie Perrin Says:

    as mentioned risk/reward is probably to the downside with the break of 80.

    As always it is the false break that has the most impact. G Sachs (like the SP500) has had a low volume early Jan break out to the upside …….. failure opens up significant downside potential

    As I write the SP500 is testing its Jan 2009 opening level of 902/903. Just having a look !!

  9. toad37 Says:

    Bought some USO and SSO on this pullback.

  10. Corey Rosenbloom Says:

    Reggie,

    True – today’s action notwithstanding. That volume divergence persists it seems.

    There’s EMA support beneath both the S&P and GS (and CAT) and it would be majorly significant if they all broke support. Thursday & Friday will be critical.

    If we fail here, it will confirm a nasty bull trap and we should expect a possible swift down-move soon.

  11. Corey Rosenbloom Says:

    Toad,

    Both funds are testing critical support levels. I’m a more conservative trader and I want to see if these levels hold.

    Whatever happens, there should be a nice impulse move up or down off these critical levels here.

  12. toad37 Says:

    Corey,
    I have tights stop and will be comfortable playing their inverse twin ETFs if we go below my tight stops. Thanks for pointing this out.

  13. dacian Says:

    Corey, sorry being off topic; how do you calculate your target prices for 5.1, 5.3, 5.5 sub-waves down for SPX, if that is coming? thx

  14. Corey Rosenbloom Says:

    Dacian,

    I’ll try to follow up in the future with a chart but wherever large 4 ends – perhaps around SP 1,000 or 1,100 or so, then we’ll do projections from there. Right now – for my level of expertise – it’s too early to start projecting fractals of the 5th wave.

    I’d love to hear others’ suggestions though.