With earnings season winding down and Janet Yellen’s speech out of the way, stocks may finally be able to focus more on price action again.
On that front, Goldman Sachs (GS) caught my attention yesterday, displaying bullish price action that has been notably absent for the better part of the past five weeks. As regular readers of this column know, I always keep a close eye on GS stock, given its often foretelling nature.
When I last discussed the state of the broker stocks on Feb. 4, I highlighted the critical support levels that both the AMEX Broker/Dealer index as well as GS stock had trickled down to. Fast forward to today, and many of the broker names looked up as well.
That’s not surprising, given the rally in the broader market. However, GS stock didn’t show any signs of green shoots until yesterday. Some of my fellow hedge funders blamed the lackluster action on concerns over the bank’s outsized bets on emerging markets.
Looking at the daily chart of GS stock, note how the stock has toiled since early February just a smidgen below its 200-day simple moving average (red). This is something we see rather often — i.e. a stock dropping marginally below an important moving average, such as in this case the 200 day, only to reverse back up.
It is also fairly ‘trading 101’ stuff, and not by random chance but because market makers and other participants routinely push stocks past important levels to trigger all the stops set at those levels, and then take the stock right back up.
After Tuesday’s bounce in GS stock, I am marginally more positive on the stock in the near-term given that GS has under performed the broader market and the financials in recent days and thus could soon be playing some catchup.
With yesterday’s outside day at the 200-day moving average, it gave us some reason to believe — particularly as the move occurred after a series of unchanged days over the past two weeks.
This isn’t an all-out bull call on GS stock by any stretch. I just thought it would be worth sharing these developments from the front, in one of the most important stocks.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
