A Fork in the Road for Goldman

 | Apr 29, 2013 | 9:30 AM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:




On a technical level, Goldman Sachs (GS) is at an important crossroads. At the current juncture, a larger bullish pattern has been juxtaposed against a more recent bearish pattern that's been developing since the Feb. 19 high, when the stock began a relatively healthy decline in a nice stair-step pattern.

Now, if the stock is to follow the path of least resistance from here, we should be prepared for a failure somewhere below the April 15 swing high of $151.45. Below that level is a standout resistance decision that comes in between $146.04 and $148.42. If the price fails to clear that resistance, we can look at the zone to define risk for a short sale.

Goldman Sachs (GS) -- Daily
Source: Dynamic Trader

For any of these trade setups, the typical target 1 is the 1.272 extension of the swing into the price-decision zone -- and, for Goldman, if the recent high remains intact, that target is $134.91. If a new high is made into the zone, this target will have to be recalculated.

This scenario constitutes the immediate potential trading opportunity we are looking at -- but remember that I said Goldman is an important crossroads. So what if, instead of failing under the April 15 high, the stock clears that key resistance takes out that prior high?

Well, first, my sell setup would fail and I would be stopped out. Second, I would have to start considering the alternate scenario and set up the next trades accordingly. This other possibility says that, if Goldman takes out its $151.45 high, the bigger-picture uptrend is more likely to resume. In that case, the upside potential in Goldman would lie in the $164.91 area.  

Now, some readers might say, "Why can't you just pick a side and be right or wrong? Why don't you just take a stand?" I could well write it that way. I could just give you the sell setup, and if the zone is taken out I'll consider myself wrong and exit any short positions.

But why shouldn't you be aware of what the alternate scenario says? My goal is to provide a helpful roadmap to the market -- and I believe that, if you're aware of all aspects of this critical juncture, it will help you in trading this stock. Ultimately, we don't have to know where the market will end up in order to extract money from it. The key is to know where and when to place a relatively low risk, educated bet. Is it more important that you are "right" or "wrong," or that you make money? I prefer the cash. Sometimes being wrong can even provide you with some very valuable information!

Bottom line: I am willing to be wrong as long as I have sound reasoning for considering a trade. It's when I mistakenly enter a trade due to emotion -- and, yes, I am sometimes guilty of that -- that I know I'm off my game.

For more information about trades and triggers, please refer here.

Columnist Conversations

View Chart »  View in New Window »
View Chart »  View in New Window »
we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
Large-cap, high-quality McKesson (MCK) is too cheap now, at $147.51 or so. The stock hit $243.60 more than 2.5...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.