GS - The Body Of Evidence

From yesterday morning on GS:

"The Bulls tried to stick the close above the 97.08 technical breakout, but failed. That presents "Ye Olde Knuckle-Biter" to The Bulls since the technical breakout didn't hold on a closing basis."

We knew from this chart yesterday morning that Trendline #2-#4 at the top of the Bullish Wolfe Wave (or Falling Wedge) came in at 96.34. Since it's declining, it isn't good enough for GS just to hold above it, but rather, we want to see "former resistance act as support" on any retest, then see the stock move higher.

A nominal dip below that trendline is fine, but then it should move to the upside. Wolfe Waves "should have" a fairly sharp move in the direction opposite the Wave #5 Fakeout Breakdown once they breakout, making it clear to everyone who was caught "wrong-footed" selling, or selling short, the technical breakdown at Wave #5 that it was a fakeout.

The "Ye Olde Knuckle-biter" close on Tuesday doesn't quite get it. If this is a Bullish Wolfe Wave, GS needs to GET GOING toward the target line, at Wave #6.



Yesterday morning, GS open on a Gap Up, came back to fill the opening gap, made a new high for the early move, then "appeared" to be tanking to the downside. That move down was a critical test of the top of the Wolfe Wave, at 96.34.

The stock gave back all of the opening gains, went into the red, but held at 96.39 (white up arrow), then powered higher, taking out the early session high (white down arrow).

The early move down was a "shakeout," similar to the Wave #5 Fakeout/Breakdown of the Bullish Wolfe Wave in the daily chart. Weak-handed Bulls, some of whom might not have been happy with the prior session's "Ye Olde Knuckle-biter" close might throw it in, and Bears accustomed to "rinse and repeat" with shorting any rally during the 2011 decline of 50% are caught "wrong-footed" on the selloff, which turned out to be a successful retest of the top of the Bullish Wolfe Wave.

Based on that pretty convincing body of evidence, I bought 1,000 GS at 97.94 on the pullback from the new session high toward the EMA's.



Similar to what we witnessed in Tuesday's session, The Bear formed and broke the neckline of a H&S Top (pattern in yellow), but The Bulls morphed it into a Falling Wedge (pattern in white), like they did in Tuesday's session, then broke out of it to the upside. More bullish evidence.



The first pullback to retest the Falling Wedge didn't quite hold, but the next two retests did (the three white arrows). More bullish evidence.

I bought another 1,000 GS at 97.82.




Oh-h, buddy!

I try not to drool when I see "nested" pattern breakouts, or multiple pattern breakouts. They don't always work out, but the majority of them not only do work out, they can really pack some punch on a breakout or a breakdown, as we've witnessed so often in the past.

The Falling Wedge (in white) was nested in the left side of a Symmetrical Triangle (in green), and there was a smaller Falling Wedge in the right side of the Symmetrical Triangle. The breakout put a target of 99.08 IN PLAY.

98.75 - High of the Symmetrical Triangle (pattern in green)
97.42 - Low of the Symmetrical Triangle

98.75 - 97.42 = 1.33 points of upside on a breakout at 97.75

97.75 + 1.33 = Target: 99.08 IN PLAY



I sold my 2,000 GS when the 99.08 target got MADE, planning to repurchase them on a pullback, if I could, but she was gone on the upside.



You see what I mean about those nested patterns "packing some punch." GS formed another "nested" Rising Channel, then took off again, scoring a high of 101.13 on the session before profit-taking set in going home.



Gain: $2,350