Financial services and trading powerhouse Goldman Sachs Group Inc. ( GS) is lower in early action Tuesday as traders are disappointed with the investment bank's fourth-quarter earnings numbers. Let's check out the charts and indicators to see how deep this downward reaction may extend.
In the daily bar chart of GS, below, I see a neutral-looking picture. The shares made a strong October/November advance followed by a December and early January correction to the downside. GS rallied heading up to Tuesday's earnings release so there may be more than the "normal amount" of disappointed longs selling now. Prices are above the rising 50-day moving average line but that could get retested in the days ahead.
The On-Balance-Volume (OBV) line corrected in December and firmed slightly heading into the new year. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside for a cover shorts buy signal but that may get reversed in the days ahead.
In the weekly Japanese candlestick chart of GS, below, I see a mixed picture. The shares are in an upward trend and trade above the rising 40-week moving average line. Trading volume has not expanded on the rally and that is disappointing.
The weekly OBV line shows an up and down move and not a sustained move higher. The MACD oscillator is above the zero line but the two moving averages are on top of each other and thus could turn up or down quickly from here.
In this daily Point and Figure chart of GS, below, I can see a potential downside price target in the $330 area.
In this weekly Point and Figure chart of GS, below, I can see a downside price target in the $295 area.
Bottom-line strategy: In the short-run, shares of GS are likely to correct to the downside but the bigger question is whether that weakness will be a buying opportunity. Hard to say right now. Maybe. Maybe not. Sounds like I am dodging the question and yes I am. For now I would keep your powder dry.
