This week’s Chart of the Week features Goldman Sachs (GS) as it appears to be facing a decline due to loss of momentum. Over the last three months, we have seen the odds of a December interest rate hike increase to nearly 100% as the markets have essentially priced in an interest rate hike at the upcoming meeting. Goldman Sachs stock has seen significant upside from this as higher interest rates are great for financial institutions. However, the technicals are suggesting that GS has topped and it could be facing a decline of 9.2% back to $218.92. We are looking at the momentum indicator depicted above and it has clearly signaled that GS topped in October at roughly $248. We are expecting the momentum indicator to fall to -20 before we see a bottom and that leads us to our $218.92 target. The last three tops that the momentum indicator displayed led to an average decline of 11.7% and this corresponds to a pullback from $248 to $218.92. Additionally, the trendline beginning in March appears to have held and the strong resistance level at ~$248 is exactly where we saw the recent reversal occur. To the downside, look to break $230.82 which is the 200 day moving average, and then the resistance level at $227. Finally, due to the fact that a December interest rate hike is fully priced into GS stock, we believe that there will be heavy selling pressure going into the Federal Reserve meeting and a great shorting opportunity exists.
Farewell and Trade Well,
Founder and Editor-in-Chief