The Final Support Shelf in Goldman Sachs GS

Jun 24, 2010: 12:03 PM CST

Those who follow Goldman Sachs (GS) chart moves are undoubtedly aware of the importance of the “Support Shelf” at $130.00.

Let’s take a look at why $130 is critical support to watch for this leading financial stock – and what it might mean for the market if support holds… or breaks.

First, a price purism look at the weekly chart to see the importance of $130:

The $130 per share level reflects the prior swing low from June and May 2009 – that doesn’t make it magical, it only gives us a prior price swing low to reference.

Once price broke under the February 2010 low at $150, we then looked to target the prior swing low at $130 for a downswing which has now occurred – now we rest at that target level.

From a pure price perspective, a break under $130 sends the next price support target to the March swing low at the $70 per share level, as the move up was a singular swing without reference lows like those which formed in June.

That’s why I’m calling this a “Support Shelf” – or Edge of the Cliff or whatever colorful name you want to use.  The main idea is that buyers have to hold above $130… or we could see a positive feedback loop send price much lower over time.

The daily chart offers a glimpse into a possible support bounce ahead for the stock…

We see the potential for a short-term triple bottom price pattern at the $135 level as shown.  Price has formed a lengthy positive momentum divergence in the 3/10 Oscillator as well – that’s bullish.

So we could very easily see a bounce higher in the stock, but we need to see a break and close above $140 then $145 to expect a move back to $150 or $160.

That’s why the $130 to $135 level will be so important.  If bulls cannot support off the weekly level and parlay a triple bottom pattern with a lengthy positive momentum divergence into a bullish price swing up… then we most likely will see a further sharp deterioration in price.

What is the alternate short-term technical pattern?  Instead of a triple-bottom as shown, one could label a short-term descending triangle pattern with upper trendline at the $137 level.  That will be something to watch as well.

It doesn’t really matter what the pattern is if we start to see a price break under $130 – so for investors and traders in GS, watch this level extremely closely.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

4 Comments

4 Responses to “The Final Support Shelf in Goldman Sachs GS”

  1. marketsniper Says:

    It breaks? When the SEC investigation went public, think that GS goes to around $85. They take it private and screw Buffet at the same time. Triple play. Just one possibility. ONLY GS could rip face on Buffet and walk away.

  2. Updated Look at Crash Recovery in GS and BP | Afraid to Trade.com Blog Says:

    […] posted not long ago about the importance of $130 for Goldman Sachs, and that level still holds true.  Check the prior post for reasons […]

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