Goldman Sachs Dancing On Crucial Technical Support

With just about one week to go until earnings season for the second quarter of 2013 is upon us, I am making a list of stocks that I want to follow closely for potential clues to broader market reaction once the earnings hit the tape.  Front and center on that list is Goldman Sachs (GS), which not only will give me a read on investor sentiment into earnings season but being an interest rate sensitive stocks also should tell me a thing or two about how investors perceive the recent hike in rates to weigh on the market.

From a lengthened medium term point of view of around 11 months, note the important line in the sand/on the chart, dating back to the August 2012 lows.  The support line (blue dotted line) just about coincides with the stock’s 100 day simple moving average (blue line) and currently also isn’t too far below the 50 day simple moving average (yellow line).  The support line currently comes in just around the $151 mark, which once again held as support in late June after the stock pulled back from the year to date highs.

The more often an area of support/resistance gets tested, the more violent an eventual break through it becomes, and that may be the most important thing to remember at this stage.  It’s too early to tell whether Goldman Sachs (GS) will slice through support here in the near-term, but if it does it may just accelerate the downward press.

GS daily

Even closer up on the chart note that the past four trading days of consolidation have created a mini bear flag of sorts, which also perfectly lines up with the aforementioned support line.  A break below it snaps all sorts of support and could quickly throw the stock toward the $145 area.  Important here is not to jump the gun for any one day reversals to the upside would quickly turn this bearish setup in favor of the bulls.

gs close up


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