Friday, May 22, 2009

Goldman Sachs' stock price signals potential trend reversal down

Goldman Sachs (GS) is always a company to be aware of and a stock to keep an eye on. So here's a quick update, since its stock price entered an area of Fibonacci retracement levels at the same time it's encountering a potential trendline from the pattern of declining highs on its weekly chart (bottom chart, below). At right is the default point and figure (P&F) chart of Goldman Sachs' stock price, as generated without changing any settings at Then the middle chart below is just a look at how its price looks on the daily chart, with some technical indicators.

The P&F chart still shows a bullish price objective to $174, which would be on the high side or even above the zone of Fibonacci retracement levels on the weekly chart. But after GS on the daily chart tested $144 with a high at $144.86 two days ago, the price fell off. Apparently that was enough to trigger a "High Pole Warning" yesterday in the P&F terminology. Doesn't negate the existing bullish price objective, just a warning that things may change. explains this particular alert as:
The high pole warning is given when a chart rises above a previous high by at least 3 boxes but then reverses to give back at least 50 percent of the rise. The reversal implies that the demand that was making the prices rise has given way to supply pressure. The pattern is a warning that lower prices could be seen in the future.
(More about P&F charts, alerts and price objectives is available at and their very educational Chart School, included in my list of "other sites of interest" at the right side of the page here).

The GS chart with daily candlesticks is below. I did mark a few possible trendlines and channel that can be watched as we go. The StockRSI in the upper technical-indicator placement (which I set on 21 rather than the default 14, to generate fewer signals for a slower-moving point of view) has shown negative divergence as price moved to this $144 area. MACD has slightly edged negative again on this leg of GS' rally. The combination indicators of Slow Stochastics on a special setting along with OBV with a 30-day moving average (a trading combination that's discussed at my NB3 blogspot, see link at right, and borrowed from's technical indicators information) can be on the verge of turning down, although that hasn't happened quite yet.

All in all, the charts are giving us reasons to believe that a trend change could trace out in Goldman Sachs' stock price, although there isn't confirmation of that yet. The daily candlesticks of today and the past three days can perhaps be in the early stages of a trap door, 1-2-3 trend reversal, or Elliott Wave-based pattern; but once again, this would be early stages only and not yet confirmed. Still, it's enough for investors to remain aware of, whether investing in GS, the financial sector generally, or even if it has implications for equities more broadly.

(from Unbiased Trading, May 21, 2009)

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