With just about one week to go until earnings from the second quarter of 2013 start to roll in, I am making a list of stocks that I want to follow closely for potential clues to broader-market reaction once the earnings hit the tape.
Front and center on that list is Goldman Sachs (GS), which not only will give me a read on investor sentiment for the earnings season, but being an interest-rate-sensitive stock, GS also should tell me a thing or two about how investors perceive how the recent hike in rates will weigh on the market.
From a lengthened medium-term point of view (around 11 months), note the important line in the sand/on the below chart, dating back to the August 2012 lows.
The support line (blue dotted line) just about coincides with GS’s 100-day simple moving average (light blue line) and currently also isn’t too far below the 50-day SMA (yellow line). The support line currently comes in just around the $151 mark, which once again held as support in late June after Goldman pulled back from the year-to-date highs.
The more often an area of support/resistance gets tested, the more violent an eventual breakthrough it becomes; that might be the most important thing to remember at this stage. It’s too early to tell whether Goldman Sachs will slice through support here in the near-term, but if it does, it might just accelerate the downward press.
Even closer up on the chart, note that the past four trading days of consolidation have created a mini-bear flag of sorts, which also perfectly lines up with the aforementioned support line. A break below it snaps all sorts of support and could quickly throw the stock toward the $145 area.
It’s important not to jump the gun here, as any one-day reversals to the upside would quickly turn this bearish setup in favor of the bulls.