Chart Patterns

Hold Back From Trading Goldman Stocks For Now

Shares of Goldman Sachs (GS) have enjoyed a powerful run up since its Nov 2008 lows, rising over 3 folds as of today. Part of this run up is due to its recent Q2 earnings announcement on 14 Jul 2009 that blew past analyst expectations, giving the stock the momentum to push past its June consolidation. GS is fundamentally a very strong stock. I won’t go into details about its fundamentals, but looking at some of the analysis that I pulled from E*Trade below, you can see how their earnings are expected to grow steadily over the next few years, and how they have consistently beaten analyst expectations.

Technical analysis of GS reveals how the stock is moving along a bullish price channel (see below). While the channel provides momentum for the stock to move higher, it is currently in the upper half of the channel, thereby increasing downside risks in the short term for those who have not bought into the stock previously.

In addition, GS stock price is facing resistance from the previous support line stretching from Aug 2007 to Sep 2008. Without a definitive breakthrough of this resistance, the stock remains uncertain.

In conclusion, GS is a great stock to buy but I’m only adding it to my watch list for now. I’m not buying at this point until the chart shows some technical improvement. Just to recap, my watch list currently consists of the following: