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.
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