Goldman Sachs Group Inc (NYSE:GS) reported its latest batch of earnings yesterday, Jan. 17. Although GS stock closed lower by close to 2% on the day, the bleeding was contained. In fact, the stock dropped right into a strong technical confluence area of support where a next trade look to be setting up.
As a point of reference, when I last discussed GS stock on Jan. 10, before the earnings report, I said that the stock looks to be well positioned for 2018 from both a structural and technical perspective. For a near-term trade setup I said the following: “Very simply, a break and hold above the $260 area should lead to a next upside target closer to $280.”
So far since then, GS stock has not yet held above the $260 area on a daily closing basis, thus no trade has set up by my book just yet.
My structural base case for why shares of Goldman Sachs could fare well in 2018 has to do with the potential to see a notable uptick in mergers and acquisitions activity now that the uncertainty around the U.S. tax overhaul has come to pass. While that does not mean this stock has to immediately rally from here, it should in my eye and all else being equal keep a bid underneath the stock.
GS Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Looking at the multiyear weekly chart, we see that in March 2017 GS stock finally revisited its 2007 highs. Since then the stock has largely been in a consolidation phase, which I view as healthy for it may be coiling up for a better move higher in 2018.
Also note that the lows of the consolidation phase in 2017 held the yellow 50-week simple moving average, which could be used as a good support area of reference.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, note that GS stock over the past couple of weeks has been consolidating in an even tighter range and that the stock managed to hold the low of this range (around the $251 area) on a daily closing basis yesterday. More interesting to me is the confluence support area closer to $248, which roughly marked yesterday’s intraday lows and also matches up with a) the yellow 50-day simple moving average, and b) trend support (pink diagonals).
More aggressive traders could now look to buy some GS stock against the $248 area as a stop loss toward the mid $260’s as a next upside target. More patient traders and active investors would first want to wait for a “follow-through” buying day that closes the stock above $257 before entering a new long-side trade.
Check out Anthony Mirhaydari’s Daily Market Outlook for Jan. 18.
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