In yesterday's Comment Section, hello said:
"does the head and right shoulder looks like bull flag for GS?"
You have the right idea, but it's a Falling Wedge. In a Bull Flag, the trendlines are somewhat parallel. In a Falling Wedge, one of the trendlines has a sharper angle than the other, like we've got here (pattern in blue), and they eventually converge (meet up with each other).
The neckline of the H&S Top came in yesterday at 159.984. The close was 159.93, so technically, the target of 147.50 is back IN PLAY. A problem, though, is that Goldman isn't showing us that the neckline is significant. In the early going yesterday, the high was 159.97, a penny below the neckline. If that had held, and if Goldman sold off toward the low, or especially if it made a new low on the session, that would have told us that the neckline was resistance. That didn't happen. Even though Goldman closed five cents below the neckline, it was able to rally above it intraday, to 160.50, so it isn't acting very reliable.
Another problem is that at the open today, August 20, the top trendline of the Falling Wedge comes in at 160.04. Goldman closed at 159.93, eleven cents below that, and is poised for an upside technical breakout. That trendline also is validated resistance. The high at Blue #3 was 165.49, making the slope -1.09. That trendline moved down to 164.40 the next session, the high of which was 164.39, validating that trendline as resistance, within one penny. Validated resistance usually has some significance, and it did. The next session, Goldman gapped down below the neckline of the H&S Top.
The slope of the neckline is +0.1389, so the neckline comes in today, August 20, at 160.123. If Goldman breaks out of the Falling Wedge, above 160.04, then gets back above the 160.123 neckline, that would suggest that it wants to make a bid for a complete gap fill of Friday's 162.73 close. The 20 DMA is up there, too, currently at 162.81.
Given the facts that, once again, Goldman "STUBBORNLY refused to die" on yesterday's gap down opening, and that we've got the "double threat" (160.04 and 160.123), if I hadn't covered my short on Tuesday, I would have yesterday. That certainly doesn't mean that Goldman will break out to the upside here. It just means that I really wouldn't have liked my chances on the short side, so I would have taken the money and retreated to the sidelines.
Will somebody please kill this stock?! Just kidding. Ju-u-u-ust kidding ;)
4 comments:
good morning.
2 question today: 1) when you calculate the slope of a trend line do you use a 5 day trading week or a 7 day calendar? 2) when considering validation of S&R and Trend lines, how do you account for noise? That is $.11 on a $160 stock is a lot less significant than on a $15 or truly insignificant on a GOOG at $450.
Good Morning, Mark,
1) 5 day trading week.
2) I consider the price of the stock, just as you said. In the Goldman example, the trendline was at 164.40. If the high had been 164.51 and the stock reversed down, that's close enough to tell us that the trendline was resistance.
If Goldman were a $16 stock, that would be the equivalent of a 16.44 trendline, and a tag at 16.45, or within one penny of the trendline. Close enough ;)
Melf,
hopefully the federal government will snuff out goldman...
that's a risk this market isn't taking into account with regards to the financials, especially in regards to the investment houses...
Kevin,
I'm not convinced that Goldman and the government are separate entities any more ;)
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