Shares of financial companies, and particularly banks and broker dealers, rallied notably on Tuesday ahead of the last Federal Reserve meeting for 2017. Particularly noteworthy in my eye was the breakout move in shares of Goldman Sachs Group Inc (NYSE:GS), which on Tuesday hurdled themselves above a key technical area of resistance and now, all else being equal, look to have renewed upside momentum.
Before looking at the charts, let me be clear that immediate reactions by stocks in and around major reports such as today’s Fed meeting — scheduled for 2 p.m.ET and a 2:30 p.m. ET press conference by Chairwomen Janet Yellen — can be all over the place, which is to say that yesterday’s breakout in GS stock could succumb to some volatility on today’s Fed day.
I have discussed the bull case for the financial sector of the S&P 500 in this column ad nauseam over the past couple of months, and yesterday’s breakout in GS stock is further testimony and indeed verification of this. Banking stocks such as that of Goldman Sachs have been significantly underperforming the S&P 500 since the financial crisis but continue to show more relative strength.
GS Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the absolute multiyear weekly chart, we see that GS stock following the 2016 U.S. election results rallied right up to its previous highs from 2007, but then for the majority of this year slipped into a larger sideways consolidation phase. Toward the end of the summer, however, financials and thus also GS stock began to lift again and by late November/early December had reached its early 2017 highs around the low $250s.
Yesterday’s rally pushed GS stock to fresh 2017 highs and thus past horizontal technical resistance. While this does not mean that the stock has to shoot higher from here in a straight line, the series of higher lows since 2008 continues to put upward pressure on the stock.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, note that within the 2017 consolidation phase, GS stock started to string together a series of higher lows in June, as marked by the green arrows. The smaller October/November consolidation phase below the March highs was another important part that allowed GS stock to coil up for the move it has strung together over the past few weeks.
With Tuesday’s breakout, active investors and traders could look to buy GS stock around $255 or higher with a next upside price target closer to $270. Any major bearish reversal on a daily closing basis would be a stop-loss signal for trades. Remember, one can always re-enter a trade.
Check out Anthony Mirhaydari’s Daily Market Outlook for Dec. 13.
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