During Monday's Mad Money program, Jim Cramer told viewers why he would rather own the investment banks instead of banks. He said Goldman Sachs (GS) is getting back to its roots and making a ton of money for shareholders, and it would make an excellent addition to your portfolio.
Let's check out the charts.
In this daily bar chart of GS, below, we can see that prices were nearly cut in half from January to the middle of March. GS rebounded in late March and made a brief retest into early April. Prices have moved higher into June with another retest of the June high last week. Prices are above the rising 50-day moving average line and the bottoming 200-day moving average line.
The daily On-Balance-Volume (OBV) line has been strong and its rise tells us that buyers of GS have been more aggressive. This aggressive buying helps to confirm the price gains so far and point the way still higher.
The Moving Average Convergence Divergence (MACD) oscillator has been turning higher this month for a fresh outright go long signal.
In this first weekly bar chart of GS, below, we went back five years to show a broad up and down trading pattern for GS.
In this second weekly bar chart of GS, below, we went back 10 years to show that the five year trading pattern (above) is just a consolidation pattern in a longer uptrend. When this $135-$275 trading range breaks out on the upside we should be witness to a strong breakout and new uptrend.
In this daily Point and Figure chart of GS, below, we can see a potential upside price target of $244.
In this weekly Point and Figure chart of GS, below, we used weekly close only price data. Here the chart shows a potential price target of $305.
Bottom line strategy: There are just a few "shops" known for their trading skills (a.k.a. swagger) and GS is one of them. I have seen a number of financial journalists writing about the market being speculative with young day traders and such, but these journalists, in my opinion, are too quick to worry about an overheated market. GS has the skills for this bull market and we are a long way from a top, in my opinion.
Traders could go long GS at current levels and add on strength above $220. Risk a close below $200 for now. The $305 area is our first upside price target.
(Goldman Sachs is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GS? Learn more now.)
