Goldman Sachs Is Dancing on Crucial Technical Support

by Serge Berger | July 1, 2013 9:45 am

Goldman Sachs Is Dancing on Crucial Technical Support

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[1]), 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.

GSdaily 1024x708 Goldman Sachs Is Dancing on Crucial Technical Support[2]

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.

GScloseup Goldman Sachs Is Dancing on Crucial Technical Support[3]

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.

Serge Berger is the head trader and investment strategist for The Steady Trader[4]. Sign up for his free weekly newsletter here[5].

Endnotes:
  1. GS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GS
  2. [Image]: http://investorplace.com/wp-content/uploads/2013/07/GSdaily.png
  3. [Image]: http://investorplace.com/wp-content/uploads/2013/07/GScloseup.png
  4. The Steady Trader: http://thesteadytrader.com/
  5. free weekly newsletter here: http://forms.aweber.com/form/42/1636996642.htm

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