Goldman & Morgan Stanley: The Olde Guards

As you probably can tell, I'm very picky and demanding about patterns and trendlines, etc. Rarely will I award a chart a "Perfect 10," but for their performance from their respective lows into the end of December, my scores for Technical Merit for both Goldman and Morgan were:

10...10...10...10...10...10...10...

The patterns and the pattern consolidations were very, very good:

1. They formed "patterns within pattern."
2. Some of the breakouts/trendlines got successfully retested, validating a breakout, or a trendline.
a. See the purple "Thumbs Up" on the Morgan Stanley chart (#3), on December 12.
b. See the purple "Thumbs Up" on the Goldman chart, on December 26/29
c.
3. They gave technical BUY signals on horrible earnings. Stocks that miss by a few pennies often get taken out and shot. Morgan missed by two DOLLARS, nearly 600% worse than the estimate. It not only didn't crash, it rallied and it broke out of a Bullish Inverse H&S pattern (see the last chart, below).
4. They temporized into the end of December, giving the 20/50DMA's a chance to play catch up, and eventually make Bullish Crosses.
5. They both had TRIPLE Bullish pattern breakouts.

Off its December low, Goldman has rallied 93%; off its October low, Morgan has rallied 198%. Whew!

Where I had to start giving point deductions was after the breakouts, both of which occurred on thin volume in holiday trading. I didn't deduct for that, but once we got into post-holiday trading, neither chart any longer was a "Perfect 10," in my view.

The lack of volume was one of the main reasons that I watched for any "foot faults" in Goldman early last week, which is how I caught both H&S Tops in the intraday charts, and which is why I wanted to short it. Both were H&S Tops with "nested patterns, " which I very much liked for a short play back to breakout support. No shares were available to short, but both downside targets got MADE (see those charts posted last week).

Ascending Triangles are notorious for morphing into Bearish Rising Wedges/Bearish Channels, particularly in a bear market. We'll examine what that looks like next.





Uh-oh. We got problems, Houston!

1. Ascending Triangle: On a retest, the top of the Ascending Triangle, at 81.19-81.29 "should be" support. On Friday, Goldman went below it, to 80.42, but it rallied off that in a down market, so that isn't much of a point deduction. Those minor violations often occur, and it ends up not being a problem. Not too bad.

2. The Rising Trendline: That trendline was "validated support," meaning that it was tested, and held (the purple Thumbs Up on the first chart, on December 26-29). Once Goldman had the TRIPLE breakout, we want to see "Go...Go...Go" to the upside, not a BREAK of that validated trendline. On Thursday, Goldman gapped down below, but quickly rallied. Well, okay, but I don't like that. Point deduction. On Friday, Goldman CLOSED below that validated trendline. Sorry, Goldman, but that's a BIG point deduction (I don't really use actual points...just having fun with that. LOL).

3. Bearish Rising Wedge: Does the pattern in blue look suspiciously like a Bearish Rising Wedge that got broken on a CLOSING basis? HUGE point deduction! LOL.

Summary on Goldman: As I said at the outset, I'm picky and demanding about patterns, trendlines, etc. and I really, really don't like Friday's close below the validated trendline, AND close below what sure looks to be a morph into a Bearish Rising Wedge. I wanted Goldman long if it could hold above the 82.19-82.29 Ascending Triangle breakout on a CLOSING basis, and it has done that so far, but I'm going to pass on that idea. In fact, I'm downgrading Goldman's scores for Technical Merit:

6...5...5...4...5...6...2

Judge #7 is extremely annoyed about the lack of volume on the TRIPLE breakout. LOL.





This post is much too long. The patterns should be self-explanatory (ask if they are not), so just a couple of comments on Morgan Stanley:

1. The volume in the Inverse H&S Bottom (pattern in blue) was near-perfect textbook: highest in the left shoulder, next highest in the head, lowest in the right shoulder, indicating a diminution of selling interest, then a breakout above the volume trendline on the pattern breakout. That looked fine. But, look at the volume on the TRIPLE Bullish Breakout (pattern in black) on January 2, and the volume thereafter. YUK.

2. Morgan looks much better than Goldman because it hasn't broken any trendlines, nor has it broken back below any patterns, but if it breaks Thursday's low of 17.65, that puts in a short-term Double Top (19.93 and 19.98 highs), which would put a target of 15.37 IN PLAY as long as Morgan trades below the pattern breakdown, below 17.65.