A Recent View of Goldman Sachs GS

Oct 28, 2008: 10:46 AM CST

Financial giant Goldman Sachs (GS) held its own relative to other large financial institutions who suffered worse or collapsed entirely.  Although Goldman recently broke beneath $100 per share recently, it might be worth looking at this stock’s recent journey to see if we can glean any insights.

Goldman Sachs (GS) Daily Chart:

The daily chart is clearly in a confirmed downtrend, as evidenced by numerous lower lows and lower highs, as well as price being beneath all three key moving averages and those moving averages being in the most bearish orientation possible.

Notice how over the last two months each retracement move to the falling 20 day EMA has served as an opportune short-sell entry… but wait… the Government banned short selling in Financial stocks.  Even with this ban in place, buyers exited long positions into this area of resistance each time it was tested.  Currently, the ban is lifted which could explain why the last sell signal (just after October 20th – the doji at resistance) worked so well.

Price continues to make new multi-year (since 2003) lows, and today (intraday) the price is off 7%.  It’s probably a little late to get a low-risk fresh short-sell on, and though we may be close to a buy signal (a test of the $75 lows or perhaps just beneath), it’s not here yet.

I did want to add a little bullish optimism that comes in the form of a positive, multi-swing momentum divergence.  At a minimum, divergences tell you the winning side (sellers) is losing strength and to exit any short-sell positions but generally we’ll need a little more confidence before initiating a fresh buy.

Notice also how the recent price triangulation action represents the difficulties for both longs and shorts – though you might know that a stock is headed lower, traders may find it difficult not only to locate an opportune short-selling entry, but once they’re short, they are subject to massive ‘rip-your-lips-off’ short-covering or ‘bottom fishing’ rallies.

Case in point, mid-September when the short-selling ban went into effect, price surged massively.  There have been similar one or two day surges that may have absolutely decimated some smaller (retail) short-sellers.  If only trading were easy (in the sense that what is headed down,  travels down neatly, cleanly, and predictably).

Stay safe in this environment and guard your capital.

3 Comments

3 Responses to “A Recent View of Goldman Sachs GS”

  1. anon Says:

    CNBC reported that GS could have shorted Volks, you know Volks has a shortsqueeze now. So they are saying GS may be involved in it.

    CNBC pushing GS down – doesn’t SEC investigate these CNBC clowns?

  2. Corey Rosenbloom Says:

    I have no idea but I’m sure if complaints are filed, the regulators will act. Perhaps disclaimers protect them but I’m not entirely sure.

  3. Tom Says:

    With today’s rally I now know I have been too bearish. I have been calling for 765 on S&P 500. Not after today in 2008. Problem today was the market disappointed after huge rally overseas and head faked down from opening until around noon (Dow up only around 100) and if you weren’t on board then then the train left the station. Think we will have big bad Bear back in 2009 but must get with the rally mode for a while I believe with or without a pullback.

    We’ll see said the Zen Master.