Goldman Sachs Group Inc: GS Stock Is a Tactical Buy

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U.S. equities rallied on Monday despite fear that a risk-off trade might occur on the back of this past weekend’s horrific bombings in Paris. The rally was largely lead by the energy sector, which reacted positively to a bouncing price of oil.

While the financial sector didn’t lead the rally, some notable bullish reversals took place in stocks such as Goldman Sachs Group Inc (NYSE:GS), which active investors and traders could now use to play for further upside, using defined risk.

Beat the BellSince my bullish call on GS stock on Oct. 1, Goldman Sachs has rallied strongly, reaching my initial price target around the $184 mark just a couple of weeks later and netting nice gains. The playbook remains the same, which is to say I will try to buy the dips for tactical rallies in the stock until this stops working.

On Monday, news broke that billionaire investor Warren Buffett sold a part of his stake in GS stock to help pay for the Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) acquisition of Precision Castparts Corp. While that may well be the case, it also arguably shows that Buffett is somewhat less convinced about Goldman Sachs as an investment than other holdings.

The cynic in me also would ask, “What does Buffett selling down his holdings spell for the 2016 stock market?” To be clear, this is not an all out bearish call on my part on the market, but it is something to take note of. Respect both sides.

GS Stock Charts

On the multiyear weekly chart, we see that as I forecast on Oct. 1, GS stock bounced nicely off  horizontal support and right into the red dotted line of resistance, which represents the 2012 uptrend. This line acts as important resistance, and the longer the stock holds below there, the more concerns should be raised regarding the bigger-picture trend for Goldman Sachs.

GS stock chart weekly
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After a few days of selling last week along with the broader U.S. stock market, GS stock staged a notably bullish reversal on Monday. On an intraday basis, Goldman quickly dipped below last week’s lows, which also marginally broke it back below horizontal support and the yellow 21-day moving average. However, this weakness didn’t last long, and GS shares began to power higher, closing the session at the very highs of the day.

gs stock chart daily
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As such, GS on Monday completed a very bullish reversal right at a crucial confluence area of support, which now offers active investors and traders a chance to buy the stock for a move back into the high $190s.

From a risk management perspective, any major bearish reversal of Monday’s rally should stop traders out of the trade.

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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/goldman-sachs-group-inc-gs-stock-tactical/.

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