Trade of the Day: Goldman Sachs (GS)

Advertisement

Stocks shot higher on a gap at the opening bell on Monday, and bonds collapsed, as investors celebrated the capitulation of the Greek government to its creditors’ demands.

Markets made very little progress after the first half hour of gains, as bulls were not able to significantly add on to their success. Earnings season lies straight ahead, and there are fears that the strong dollar and weak global demand have sapped U.S. companies’ profits. Several major companies have pre-announced earnings shortfalls.

The deal forged early Monday morning in Brussels gives Greece another chance to prove that it can reform its pension, banking and market systems enough to strengthen its economy and pay off its debts. Athens was also forced to agree to sell about 50 billion euros’ worth of state property, or privatize public functions, in an effort to make profits that can used to pay down debts.

There are still many hurdles to overcome, so Greece is by no means out of the woods, despite this initial celebration.

While largely overshadowed by Greece, another bounce in Chinese stocks was also cited as supportive for the global risk sentiment. The Shanghai Composite ended up 2.4%, gaining for a third straight session, while Shenzhen finished 4.2% higher. It was fairly quiet in terms of market-supporting headlines, though the government did announce a crackdown on identity fraud and gray-market margin lending in an effort to foster a more steady recovery in stocks.

Better-than-expected June trade data provided another tailwind, particularly given the recent ramp in growth concerns. Sector-wise, techs were the best performers, which was nice coming off a terrible few days last week. Retailers and financials also fared well, led by money-center banks — though our regional banks fared well, too.

The past two days’ advance is something we have seen over and over this year: a rally from a predefined low that pushes into the middle of the trading range. The next move may be to the top of the range, or bears might feel frisky and keep that from happening.

My expectation is that bulls will stall out around the current levels (or slightly higher), but not for too long. The 2,080 level of the S&P 500 was resistance, and now it is support. With some decent earnings reports, the stage may finally be set for a vault above the range.

Trade of the Day: Goldman Sachs Group Inc (GS)

My trade recommendation today is Goldman Sachs Group Inc (GS), a major investment bank based in New York and a member of the Dow Jones Industrial Average. Goldman Sachs has been a leader among financial institutions and will certainly be at the forefront of any assault on the recent market range.

Buy GS on a pullback to $206.50 limit, good till canceled. If filled, set up to sell all at $219 limit, good till canceled.

Jon Markman writes a daily trading newsletter, Trader’s Advantage, and CounterPoint Options, a service geared towards helping individual traders make steady, consistent profits with the VIX. Follow him on Twitter for his latest take on markets and innovation, and be sure to check out his Top Stock for 2015 here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/07/trade-of-the-day-goldman-sachs-gs/.

©2024 InvestorPlace Media, LLC