Goldman Sachs Analysis Chart for March 28

Mar 28, 2009: 10:42 AM CST

Goldman Sachs (GS) has been on many trader’s radars because it has shown relative strength over the Financial Sector (XLF) and the broader S&P 500 since its November lows.  Let’s take a look at GS on the weekly chart (using two possible Elliott Wave Counts) and then at the Daily Chart, where we see a rising trend channel and its respective relative strength lines.

Goldman Sachs (GS) Weekly:

Let’s start with the two possible Elliott Wave counts.

The circled numbers represent one count which implies a 5-wave decline as we are expecting on the broader equity market indexes.  If this count is dominant, it helps clear up the “Which Wave 5 just completed” debate – it would imply that there is one more primary wave 5 down yet to come, and that it might be starting soon.

I have ‘fractalized’ Waves 1-3, and these fractal counts remain valid in both interpretations.

The second or alternate count implies something entirely different.  It assumes that we have completed an ABC large-scale Zig-Zag pattern off the October highs from 2007.  A Zig-Zag contains a 5-wave A, 3-wave B, and 5-wave C which is what we saw going into the November lows of 2008.  If this count is dominant, then it would imply we are completing primary Wave 1 of a fresh new impulse.

That would be a very difficult position to argue in such an environment (recession, bear market) but one at least need be open to the possibility.

Elliott Wave aside, price is coming up into resistance via the falling 50 week EMA at $120 per share.  Price has formed an impressive rally off the November lows, but I must say that the angle of ascent resembles that which you normally would expect a Bear Flag.

Goldman Sachs (GS) Daily:

I’m adding an extra component to the Daily Chart – that of two Relative Strength lines.  The main take-away is that Goldman Sachs has outperformed both the XLF and the S&P 500 since November – that’s a good thing for investors.  The implication is that “Stocks that are Strong tend to get Stronger.”

Otherwise, we have a rising trend channel that has developed off these lows, and price is now at the upper resistance line which corresponds with the falling 200 day SMA (and just shy again of the weekly 50 EMA).  This zone may prove significant resistance, especially given that two dojis and a hanging man have formed at this confluence resistance level.

Risk is a little high to buy Goldman Sachs here, though a break above $120 (or $125) would eliminate resistance.  Odds are that we at least get a pullback swing into support which may come in at best at the EMAs at about $100 (though that has not ‘worked’ in the channel) or at worse at the lower end of the rising trend channel around $80.

In the meantime, keep watching this trend channel and the larger structure for this newly annointed ‘darling’ stock.

Corey Rosenbloom
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Travel to the LA Trader’s Expo in June to hear Corey speak on “Idealized Trades for Intraday Traders”

15 Comments

15 Responses to “Goldman Sachs Analysis Chart for March 28”

  1. Anonymous Says:

    Thanks Cory, GS has been one hell of a roller coaster to ride… I’ve havn’t been successful trading it because I overly commit on my position size which makes my losses add up quick. I have been watching it since it popped over 105 and stallying around 116. It’s definately a great stock to day trade if you can get in on a good setup. Let’s see what happens. So if this is a new (1).. you think 120 is the maximum it can go up.. or is there another level which EW would consider. Thanks Munchi

  2. Corey Rosenbloom Says:

    Munchi,

    True! I don’t day-trade equities as much any more but the price swings have been excellent, haven’t they?

    I’d be skeptical of it being a new (1) but Elliott aside, there seems to be confluence resistance about the $115/$120 level from EMAs (and trendlines) on different timeframes which adds to the weight of the evidence. That’s also why a break above $120 would be very bullish.

    I’d expect a pullback to support from this level to find a possible buy-in spot.

  3. insane! Says:

    GS hit 5 on EWT…no way do they test the lows. (Because my options are counting on it 😉

  4. Anonymous Says:

    Hey Corey,

    I’d noticed you will be in LA Trader Exposed in June, but I couldn’t find out where I can register in it.

    Brandon

  5. Anonymous Says:

    Cory, can oh provide some specifics about re trading expo?

  6. Anthony Says:

    Hi Corey,
    There are a number of bearish price structures setting up on GS:
    1/ Butterfly terminal
    2/ ABC sell corrective structure (a cluster of price points from market geometry at point C)
    3/ Candlestick perspective
    harami cross, hanging man, doji, small body
    4/ Elliott wave 4
    (will email my chart as it is hard to explain)
    Thanks
    Anthony

  7. nnecker Says:

    Hi Corey ,can you do a wave count on the vix to see how it coresponds to the sp500,thanks Mark.

  8. Corey Rosenbloom Says:

    Insane,

    I feel that way so many times!

  9. Corey Rosenbloom Says:

    Brandon,

    I’ll be putting up an image link on the blog but until then, you may register at:

    http://www.moneyshow.com/caot/register.asp?scode=014052

    I look forward to seeing you there if you’re able to make it!

  10. Corey Rosenbloom Says:

    Anon,

    Feel free to browse around the LA Expo Homepage for specifics on the schedule, bios on speakers, etc:

    http://www.moneyshow.com/caot/main.asp?scode=014052

    It’s four days of free seminars, product demonstrations, forums, and social activities designed to network you with other traders and educators. I’ve attended five Expos so far and have loved every one. It’s such a great motivator – learn new techniques, meet other traders, and enjoy some time with people who share the same passion you do for trading the markets.

  11. Corey Rosenbloom Says:

    Anthony,

    Thank you for sharing! I’m increasingly becoming interested in Market Geometry and Pattern Recognition. I’ll follow up through email.

  12. Corey Rosenbloom Says:

    NNecker,

    I’ve never had much luck doing deep analysis and wave counts on the VIX. I’ll look into it and see if I find any insights and will share them if so.

  13. Goatmug Says:

    Corey,
    In the short run you may be right, but I think a short entry at/near the 200 day moving avg might be worth a trade. Every attempt to invade that level has met with a significant reversal.
    Tight stops make that a low risk high reward trade — wouldn’t you agree?

  14. Corey Rosenbloom Says:

    Goatmug,

    The sell signal came as this chart was published. A logical place to put a stop would be just above the confluence resistance at $120.

  15. yogi Says:

    Thanks for your excellent analysis