We had a SlingShot Trader member ask us why we have a bullish stance on Goldman Sachs (NYSE:GS). In this video, we review the charts to show you why Goldman is going up.
If you were to look at a weekly chart, you could see that GS has not been in an uptrend going back to 2004. If you went out to a monthly chart, you’d see much the same thing going back to 1999 that it hasn’t been in a classic uptrend on the monthly chart.
The reason why I said it was in a classic uptrend is because on the daily chart it is. As we look at the price where it was in August 2013 at $90, and it’s climbed almost up to $160. It’s currently trading around $150; that’s a classic uptrend for us.
The important thing to remember is when we’re looking at any chart when we’re making investing decisions is to focus on the chart timeframe that is most closely going to match the timeframe of our trade. So, if you are making trades like we do in SlingShot Trader where we plan on holding them anywhere from a week or two, a daily chart tends to work out well.
You could even drop down to an hourly chart if you wanted to but, for us, we like to look at the daily chart. We like to see the opening and closing prices for the full trading period. We think it’s quite helpful. If we were looking to hold a trade for a much longer period of time, then a weekly chart would be much more conducive to our analysis for that type of trade. Or, if we were looking to enter a trade in the morning and get out that evening, we would most likely be focusing on a much shorter-term chart.
So, as we look at the timeframes for these charts, we stick with the daily chart in most of our analysis because that’s the timeframe that fits the trading period that we are looking for. Now, when we entered a bullish call option trade on GS, we saw the stock drop down initially but in the trade alert we sent to SlingShot Trader members, I talked about the potential bullish pennant that is being formed right now on the stock.
So, GS has a great uptrend, and a bullish pennant is a bullish continuation pattern that has the characteristics of a downtrending resistance level and an uptrending support level that are converging on each other. Often times when we see a pennant, it will bounce back and forth and back and forth in between two levels, and then eventually break up and through that downtrending resistance level. It’s this breakout point that completes the price pattern. It completes the bullish pennant for us.
So, as we look at GS’ pennant, we’re anticipating that the stock is going to continue to consolidate for a little bit longer but eventually is going to break up and through this downtrending resistance level, complete the bullish pennant and resume the uptrend that the stock has been in for the last little while.
Investor Place advisors John Jagerson and S. Wade Hansen are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next trade and get 1 free month today by clicking here.