Triangle Break in Goldman Sachs

Dec 13, 2007: 10:55 AM CST

Goldman Sachs today breached a triangle consolidation pattern to the downside, which has potential ominous implications for the broader market.

Not only did price break beneath a triangle or coil formation, but price violated the significant “200 day moving average” which often is viewed by those with little technical analysis knowledge as the “line in the sand.”

The momentum oscillator also formed a coil or triangle and momentum (black line) also has breached to the downside.

It must be noted that the $205 price level has held as support, and I may need to redraw the triangle to a more ‘right angle’ triangle should this level hold as support, and as always price could breach beneath temporarily, drag in short-sellers (and trigger stops) and then eject back to the upside.

There’s no way to know for sure which direction price will eject from a consolidation point, but often price moves can lead to strong temporary momentum (directional) moves.

In this case, it appears the move could be to the downside, which would have negative implications for the broader market, especially if financial stocks tend to lead the market.

Keep your eye on this and other charts from major financial companies.

3 Comments

3 Responses to “Triangle Break in Goldman Sachs”

  1. MarketBeat Blog - WSJ.com : Blog Roll -- Volatility and Financials Says:

    […] Meanwhile, on the Afraid to Trade blog, Corey Rosenbloom notes that shares of Goldman Sachs have breached certain key levels, which are too involved to explain here, but he says momentum will rule the next move. “It appears the move could be to the downside, which would have negative implications for the broader market, especially if financial stocks tend to lead the market,” he writes. […]

  2. jacksoo Says:

    Ho Corey,
    Haven’t posted for a while but still follow your comments closely. I’ve been trading GS over the last few days (puts) following the Sym Tri – target of closing below $211 to confirm break. HOWEVER – I sold out my puts mid session because they’ve results on Monday and frankly I’m nervous of holding going into the weekend – I’ve seen too many huge swings (if I wasn’t so paranoid I’d say manipulated 😉 ) and would hate to be hit with a huge gap up pre open Monday that turns $+ into big $-. Thinking that I’ll play the move agin after the news. If Sym Tri is truely broken downside could be around $35-$55 ??? All the best.

  3. Corey Rosenbloom Says:

    Hey Jacksoo,

    Thank you for reading! Indeed, sometimes it takes fundamental or news related reasons to cause radical departures or imbalances in the supply/demand equation. If GS reports billions and billions in losses in part due to the sub-prime lending, then their shares will be suddenly less in demand, resulting in ‘technical’ (charting) breaks from consolidation.

    If classic TA is at work here, then the projection will be from the highest point in the consolidation, which actually is closer to $45 to $50.

    The weekly chart is showing support at the same level where the daily is showing a potential breakdown. This is one of those “it could go either way” scenarios that no one loves.

    If it’s truly a break, then there will be more than one entry to play in the direction of the break. It shouldn’t happen all at once.