In the no huddle offense of the Mad Money program Wednesday night, Jim Cramer talked about Goldman Sachs ( GS) , which is currently battling the Malaysian government. That government has accused Goldman Sachs of fraud. Cramer said he expects the company and country to settle, but it may take awhile. The charts suggest it could be painful in the weeks ahead.
In this daily bar chart of GS, below, we can see a downtrend from March. Prices have declined significantly but the selling pressure has not let up. GS is well below the declining 50-day moving average line as well as the slower-to-react 200-day moving average line. The daily On-Balance-Volume (OBV) line has been weakening since April and just made new lows for the move down this month. Sellers of GS have been more aggressive. In the lower panel I can see that price momentum has slowed from late November to December but this bullish divergence is probably too small to make a difference.
In this weekly bar chart of GS, below, I went back to early 2014 to get some longer-term perspective. The price action in 2017 and 2018 looks like a large distribution pattern. Prices are below the declining 40-week moving average line and we need to look back to 2016 to find any potential chart support. The $160-$140 area is not a big consolidation pattern and it was a while ago - buyers may not be thinking about buying in this area. In the lower panel is the 12-week price momentum study which is not showing a bullish divergence on this time frame.
In this Point and Figure chart of GS, below, we can see a potential downside price target of around $146. If GS reached this price target it would mean it was more than halfway through that $160-$140 potential support area. Many times when a security moves more than halfway through a support zone it will move all the way through.
Bottom line strategy: the price of GS could bounce in the short run but further declines look possible according to my read of the charts.
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