Lessons from Goldman Sachs GS Daily Chart

Apr 28, 2009: 12:24 PM CST

Goldman Sachs (GS) is coming into Fibonacci resistance on a negative momentum divergence.  Let’s look at this current development as well as learn a few lessons – such as a clear “Three Push” example – on its daily chart.

(Click for larger image)

First, let’s look at the “Three Push Reversal” pattern that formed on Goldman’s September, October, and November lows.  We had three relatively even-spaced symmetrical swings down to new lows, each one forming a positive momentum divergence in the 3/10 Oscillator.  If you look closely, each swing formed on a lower volume reading, which was also a type of divergence (the urgency to sell was reduced on each swing).

Price formed a hammer (candle) on the third and final ‘push’ to new lows, which was an aggressive buying signal that worked out very well.  Price has since doubled from this area.

Now let’s move from the lesson in the past to the real-time analysis.

Goldman Sachs is struggling to overcome the $125 area, which represents the 50.0% Fibonacci retracement from the May 2008 highs to the November lows.  A Negative Momentum Divergence has formed under price as we have moved to new highs (the momentum high registered in late March though price has moved higher from this level).

A slight negative volume divergence has also set-up as well.

Bulls have managed to ‘hug’ the 20 day EMA all the way up, and that currently rests at $117.20.  A breakdown of this price will almost certainly set-up a quick ‘magnet trade’ or sudden retest down to confluence support (of the 38.2% Fibonacci retracement and the rising 50 day EMA).  Failure there would deal a devastating blow to the bulls, and could send the stock back down to test the $75 level… but that’s far into the future.  Let’s try to take it one swing at a time for best results and take in new information as it comes.

For now, it appears the $125 area is holding as key resistance.  If taken out, the bulls would have scored a major victory and we could see price continue to rise in its amazing fashion.  So, watch $125 very closely in the coming days.

Corey Rosenbloom, CMT
Afraid to Trade.com

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2 Responses to “Lessons from Goldman Sachs GS Daily Chart”

  1. Hardev Singh Says:

    Dear Sir,
    I was trying to read Diversion between HISTOGRAM and 3,10 OSC for the reversal.
    During 3 push (BETWEEN SEP -DEC 08) it is clearly showing diversion between 2nd & 3rd push (eventhough not very much clear between 1st& 2nd push)Histogram by itself i smaking lower tops & rising bottom but also forming diversion with OSC 3,10 we can see some diversion (though not very prominant) as this is stage 1 & 2 but Picture will more clear when we are between 2-& 3 towards 3rd COMBINATION OF 3,10 OSC & HISTOGRAM DIVERSION CAN BE USEFUL SETUP FOR SWING TRADE
    Another aspect i want understand is implication of rising volume near the top, at the bottoms of 3rd push in sep08 as well as january bottom surge in volume near the top but lesser vol near the top except for the latest is suggesting buying intrest at the botoms but lesser at the top & finally big sell off at or closer to the recent top

  2. Hardev Singh Says:

    Another look at the Trigger in OSC can be made as the direction trend is about to change the trigger shifts very close to the black line this drifts farther as the trend gathers momentum ( down or up) then the reversal process starts it starts drifting closer progressively reducing the differential This is also confluence with OSC & its histogram ( Total components of OSC 3,10,9 & Volume or some other indicators neccesary for a flaw less swing trade set up….!)