Today’s Big Stock: Goldman Sachs Group, Inc. (NYSE: GS)

The Goldman Sachs Group, Inc. (Goldman Sachs) is a bank holding and a financial holding company. Goldman Sachs is a global investment banking, securities and investment Management Company providing a range of financial services to a client base that includes corporations, financial institutions, governments and high-net-worth individuals. Its United States depository institution subsidiary, Goldman Sachs Bank USA (GS Bank USA), is a New York State-chartered bank. Goldman Sachs operates in three segments: Investment Banking, Institutional Client Services, Investing & Lending and Investment Management.

Please take a look at the 1-year chart of GS (The Goldman Sachs Group, Inc.) below with my added notations:

 

After a 7-month trend lower, GS has formed what appears to be a Double Bottom (pink) price pattern. The pattern is as simple as it sounds: Bottoming, rallying up to a point, selling back off to the same bottom, and then rallying back up again. As with any price pattern, a confirmation of the pattern is needed. GS would confirm the pattern by breaking up through the $117 resistance (navy) that has been created by the Double Bottom pattern.

Keep in mind that simple is usually better. Had I never pointed out the Double Bottom pattern, one would still think this stock is moving higher if it simply broke through the $117 resistance level.  In short, whether you noticed the pattern or not, the trade would still be the same: On the break above the key $117 level.

The Tale of the Tape: After a 7-month downtrend, GS formed a Double Bottom price pattern. A long trade could be entered on a break above the $117 resistance with a stop placed under that level.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT