Shares of The Goldman Sachs Group (GS) are trading lower Tuesday as traders react to their disappointing quarterly numbers. Is this the start a fresh move lower or is it a pullback we may want to buy?
Let's review the charts and indicators.
In the daily bar chart of GS, below, I can see the price action through Monday's close. The shares are trading in the $328 area in the pre-market Tuesday so we have to use our imagination. At this point in time the easy conclusion would be to say that prices failed at the underside of the 200-day moving average line.
The strength in the On-Balance-Volume (OBV) line from the middle of March and the rise of the Moving Average Convergence Divergence (MACD) oscillator from late March suggest that the early weakness in GS may be short-lived.
In the weekly Japanese candlestick chart of GS, below, I see more positive clues than negative ones. The shares have rallied to the underside of the 40-week moving average line. The most recent candle looks like a spinning top suggesting a near balance between bulls and bears.
The weekly OBV line shows a long decline until March where the line starts to improve. The MACD oscillator has been narrowing towards a potential bullish crossover.
In this daily Point and Figure chart of GS, below, I can imagine a pullback to $328. This is not likely to turn this chart bearish and erase the upside price target in the $407 area.
In this weekly Point and Figure chart of GS, below, I can see a potential downside price target in the $229 area.
Bottom-line strategy: Some declines are the start of a new downtrend and some declines are just dips in uptrends. I see the current weakness in GS as the latter but aggressive traders should wait for a lower shadow on a 60-minute candlestick chart before buying.
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