GS: Inverse H&S Fractal

This is the hourly chart from Wednesday's close. The Bullish Inverse H&S is dominating the chart, so let's review what we were looking for in yesterday's session:

"In the Hourly Chart, despite the poor earnings, The Bulls have a chance at more upside if they can defend the neckline of this Inverse H&S pattern, the upside breakout of which helped to propel GS to the Wolfe Wave target. It currently comes in just below 100.00 and is declining a bit each hour.

Any trading below that neckline is "Ye Olde Knuckle-biter" for The Bulls, calling the bullishness of the pattern into question. Anything below the 94.52 low of the Right Shoulder would call the bullishness of the pattern into serious question. Right Shoulder lows "shouldn't" get taken down."



GS opened on a "Gap And Crap" and immediately broke below the neckline of the Inverse H&S, which was just below 100.00, handing The Bulls "Ye Olde Knuckle-biter."

A Descending Triangle formed (pattern in white), which straddled the neckline, going above and below the neckline in the Hourly chart (first chart, above). That pattern resolved to the downside, sending GS deeper below the neckline. Not good for The Bulls.

The Bulls then put in a little Double Bottom (in yellow), broke out of it to the upside, then formed a Symmetrical Triangle (in orange) in an attempt to establish a second bullish pattern breakout. They weren't successful. The Bears broke the Symmetrical Triangle to the downside AND they took out the lows of the Double Bottom (in yellow), sending GS to a new session low. The Bulls had to start all over again. UGH.

The Bulls formed a little Rectangle (in green), but the problem with that little pattern is that if it were to break out to the upside, The Bulls had to rally into IMMEDIATE resistance from the broken Symmetrical Triangle and the broken Double Bottom. I wasn't interested in getting long a rally smack into resistance if The Bulls could break it out, but continued to follow the action.





The Bulls temporized for a bit longer, within The Rectangle, then broke it out. I liked that. "The bigger the base...the better the breakout." That wasn't a large base, but it was broader than where it was in the last chart, encouraging The Bulls who were trapped in the broken Symmetrical Triange and the broken Double Bottom NOT to sell when they got whole on the rally. The Rectangle breakout put a target of 99.26 IN PLAY. If The Bulls could get there, that would be "some" evidence that the low was in and that The Bulls were ready to do something on the upside.

Math for The Rectangle target:

98.78 - Identical highs of the pattern
98.30 - The more conservative of the 99.30 and 99.28 lows

98.78 - 98.30 = 0.48 points of upside on a breakout above 98.78.

98.78 + 0.48 = Target: 99.26 IN PLAY

The Bulls rallied to 99.248, just over a penny shy of the target, then pulled back for a retest of the top of The Rectangle. I liked that. I bought 2,000 shares of GS for 98.78 on the retest, which is an example of what is meant when we hear, "Pick your spot," or, "Let the trade come to you." Buying retests of upside breakouts and shorting retests of broken patterns are nice entries into a stock. We find out very quickly if it's going to be successful, or not, and if we're going to get into "Ye Olde Knuckle-biter" (back below the breakout), or an outright failure.



WHOA! The Bulls formed a Symmetrical Triangle (in yellow) after the successful retest of the top of The Rectangle, then broke out of it. We know that nested patterns and multiple pattern breakouts can pack some punch, so I was expecting a rally, but not tha-at much of a rally so quickly. GIMME THE MONEY and a minute or three to figger that one out!! LOL.

It didn't take long for me to say, "Oh-h, geez..."



(1) The failed Double Bottom, (2) the failed Symmetrical Triangle,(3) the Rectangle, and (4) the second Symmetrical Triangle all had "morphed" (changed) into a Bullish Inverse H&S pattern, a "fractal" of the large one in the Hourly Chart (first chart above)!

"Fractal" simply means a repeating pattern, or repeating behavior. The word was invented so that we can go round cocktail parties saying it, giving everyone the impression that we've got half a brain when we know that we really haven't. Say "fractal behavior" to people with whom you particularly don't wish to have intercourse. They'll flee your side in short order, in recognition of the fact that you've trumped them in the "boring conversation" department ;)

I wanted my 2,000 shares of GS back on a retest of the neckline, but didn't get it. The pullback was shallow, then she had another leg up.



The Inverse H&S target of 100.27 got MADE, and then some.



I also wanted my 2,000 shares back, at 100.43, on a retest of the late afternoon Falling Wedge breakout. I didn't get that one either. The pullback was only to 100.46. The Falling Wedge target of 101.55 got MADE. Without me. Curses!



This is the Hourly chart again, updated to include Thursday's trading. The Bulls had to endure "Ye Olde Knuckle-biter" for a bit, but managed to close the session out back above the neckline on the strength of the Bullish Inverse H&S fractal in yesterday's intraday chart.



Gain: $1,700

GS: Bullish Wolfe Wave Target

The Wolfe Wave target got MADE at 104.69 in early trading yesterday morning. That's one for the textbooks, not only for its nice execution, technically, but because the bullish target was achieved against the backdrop of a huge miss on earnings on the fundamental side. Quite lovely.

What wasn't lovely...



...was the fact that when GS was called Gap Down at the open, I entered my order three minutes before the open to buy 2,000 shares of it at 100.75, well above horizontal support at 100.50. "They" blew past my order, down to 100.34, then ripped it to the upside past my order again, and left me pipped at the post with my order NOT filled.

I called my broker on that nonsense, who said, "Security and Exchange Commission Rule 611...yap yap yap...order protection...yap yap yap...market sweep...yap yap yap..."

I said, "So, you're telling me that I got '611-ed.' Is this a polite way that you youngins have of saying, 'YOU GOT ROYALLY SCWOOOED out of an $8,000 trade, Melf?'"

The lad gave a chuckle, but gave me no shares of GS at 100.75. That's fine. I handled it with my usual dignity.

Curses! Curses!! CURSES!!!



The Wolfe Wave target of 104.69 got MADE at 10:10AM shortly after it was explained to me how I got "611-ed." No problem.

LOUSY BUZZARD FACES!!!!!!!!!!!



There wasn't much left in The Bulls after the 104.63 target got MADE. The high on the session got put in one minute later, at 104.94, then The Bears took over, breaking the neckline of a H&S Top (in white), breaking a Bear Flag (in yellow), then breaking a Double Bottom attempt at 102.00 (in orange). The session finished with a Rectangle (in green).



In the Hourly Chart, despite the poor earnings, The Bulls have a chance at more upside if they can defend the neckline of this Inverse H&S pattern, the upside breakout of which helped to propel GS to the Wolfe Wave target. It currently comes in just below 100.00 and is declining a bit each hour.

Any trading below that neckline is "Ye Olde Knuckle-biter" for The Bulls, calling the bullishness of the pattern into question. Anything below the 94.52 low of the Right Shoulder would call the bullishness of the pattern into serious question. Right Shoulder lows "shouldn't" get taken down.

GS: Bullish Wolfe Wave - Lousy Earnings

Excerpt from Goldman's release of earnings:

"The investment bank said it made a loss applicable to common shareholders of $428 million or 84 cents per share in the third quarter, compared to $1.74 billion profit or $3.19 per share in the year ago quarter and $1.05 billion or $1.96 per share in the second quarter of 2011.

Goldman's results disappointed both on revenues and the bottomline. Analysts were expecting the firm to post a loss of 16 cents per share on revenues of $4.25 billion according to consensus estimates."

YEEKS. Big earnings miss, far below analysts' expectations. But, remember...

"It isn't the earnings that matter. The only thing that matters is the market's RESPONSE to the earnings."

The market's initial response was all over the board. A big gap up at the opening gong, with Bulls saying, "See-ee? That bad news already is factored in!" Then a complete retracement of the early rally and into the red with Bears saying, "See-ee? The bad news was NOT already factored in!"

Ain't we got fun? LOL.

First and foremost in my mind was the Bullish Wolfe Wave that we've been watching for the past week. We never want to "see what we wanna see" in the market. We want to FOLLOW what's going on, as best we can. If what we're seeing at any given time doesn't play out, we don't want to try to force our interpretation on the market when it simply isn't there. In this case, specifically, we don't want to get locked into the idea that the Bullish Wolfe Wave is going to play out, but we also don't want to get lathered up bearish because of the huge earnings miss.

By noontime, The Bulls had come roaring back off the early selloff, had broken out of the Channel (in white) and had formed an Ascending Triangle (in yellow) with a smaller Ascending Triangle (in orange) nested within it. Lovely. We know how nice nested patterns and multiple patterns can be on a breakout. I bought 2,000 GS at 98.90 in anticipation of a breakout. Mental stop below the 98.58 low of the little orange Ascending Triangle.



The little Ascending Triangle broke out, but "bigger picture," the entire session was a large, wide-swinging Symmetrical Triangle and GS got refused right at the top of the pattern (white arrow), validating it as resistance. Oops.

Additionally, GS was languishing as it moved into the apex of the Symmetrical Triangle. Thomas Bulkowski did research on those patterns and discovered that if stocks go beyond two-thirds of the way to the apex and don't break out, the majority of them fail and break to the downside.

Because of those two factors, I decided to throw it in at 98.88 for a small loss and wait to see what developed. I don't mind "paying up" for a stock if it looks right.





Well-ll...she broke out, just ahead of the apex! I was wanting to get long again on more of a pullback, but I also didn't want to miss a nice rally if GS was going to take off to the upside, so I "paid up" and bought back my 2,000 GS at 99.25 with the same mental stop of 98.58, the low of the little orange Ascending Triangle.



I bought at the yellow down arrow, then GS promptly came down and busted my 98.58 mental stop, by just two pennies! UGH. You're joking, Ms. Market, right??!! LOL.

That sure looked like a stop-busting "shakeout/fakeout" when it occurred, but I respected it and sold into a little bounce, at 98.70, determining that I would "pay up" again if GS got back over 99.00, which would be pretty good evidence that the break of 99.58 was, indeed, a fakeout. "If, at first, you don't succeed..."

I "paid up" again and bought back my 2,000 GS at 99.05 (orange arrow). That play finally worked. The Bulls formed the Symmetrical Triangle in orange, a "fractal" (repeating pattern) of the larger white one, then we got what we so often see with nested patterns and multiple pattern breakouts...

...KABOOM.

Despite the fact that the Bullish Wolfe Wave still was IN PLAY and that the rally "could be" much more explosive, as is the nature of Wolfe Waves, after two false starts, I sold into the upside Screamer, at 100.72. I was satisfied with that result and also was happy to give my old eyes a rest after watching the chart for five hours. I ain't as young as I useta be ;)



After a brief pullback, GS exploded to the upside again, putting in a session high of 103.79 (whew!), which...



... didn't quite make it to the Wave #6 target line, but it scored a big chunk of it.

Yesterday's market REPONSE to earnings was a case of the technicals trumping the fundamentals (much worse than expected earnings). That isn't always the case, but if we try to FOLLOW the market as best we can and focus on what is happening, we'll do alright.

My "best" certainly wasn't that swell yesterday, with the two false starts, but I came out of it alright. Trading the market is very much like playing poker. We aren't going to win every hand, but if we limit our losses and keep banging away at it, we'll do fine.



Gain: $2,200

FCX And GS

From two weeks ago on FCX:

"The Bulls have some work to do, building good bases and breaking out of them. The base-building process can be slow-w-w, but again, the Bullish Key Reversal looks good if it holds up."

Since the Bullish Key Reversal on October 5, The Bulls have done alright. They broke out above horizontal resistance near 36.00 (horizontal white line) last Wednesday for a "higher high," but it was on a Gap Up, which left TWO unfilled gaps in the intraday charts. That move resulted in both gaps getting filled on Thursday.

Friday was another Gap Up above the 36.00 area. UGH. Those "common gaps" tend to get filled sooner rather than later and it did in yesterday's selloff. I bought 2,500 shares of FCX at 35.05 after the gap was filled.





The market continued down for most of the session. Although FCX put in its session low early and held up all day, it didn't do much on the upside. I sold it for 35.28 in the final fifteen minutes of trading.





GS got whacked at the open, but what I liked about it was that it reversed higher immediately and took out the late Friday high (first white arrow), pulled back to the EMAs, then took out Friday's high (second white arrow). I bought 2,000 GS for 96.70 on the next pullback to the EMAs.





What I didn't like about it was that GS pulled all-ll the way back to the opening low and I very nearly was stopped out of it. LOL. I couldn't fault the GS Bulls, though. The benchmark SPX still was tanking, but GS held the early low (red arrow).

"Doubling down" on a loser, hoping that we'll get even (or better) on a trade, generally, isn't a good idea. "Hope" isn't a strategy. If, however, "the body of evidence" suggests that we've got sound reason for doubling down, it's justifiable.

Shortly after noon time, GS was giving a very bullish non-confirmation of the lows in the SPX. It had broken out of a Channel (pattern in white) and was forming a Symmetrical Triangle (pattern in orange) at the top of the Channel. That looked very nice. I bought another 2,000 GS at 96.00 with a target of the horizontal resistance at 96.81 (red line).




I sold all 4,000 GS for 96.83.



GS put in a high of 96.89 off that Double Breakout, then went into this Double Nested Channel. It started out being a Descending Triangle (pattern in yellow), which broke down, but morphed into TWO Channels: (1) the larger one, in white; (2) the smaller one in green, nested within it.

After the Double Nested Channel broke out, I bought back 2,000 GS at 96.36 on the pullback to the top of the Channel. The breakout put a target of 97.57 IN PLAY.

96.87 - high of the pattern
95.64 - low of the pattern

96.87 - 95.64 = 1.23 points of upside on a breakout above 96.34.

96.34 + 1.23 = Target: 97.57 IN PLAY



I had my hand on the buzzer to sell at the 97.57 target, but GS rallied only to 97.53, four cents shy of the target. Curses!

I sold at the Two Minute Warning, for 97.05.



Gain on the session: $3,800

GS: Third Wolfe Wave Retest

GS came out of the gate at Friday's opening gong on a Gap Up to the top of the H&S Top (in orange). It filled the opening gap, scored two successive new highs on the morning, then tank...tank...tank. Yeesh.

We knew from yesterday morning's daily chart that the top of the Wolfe Wave/Falling Wedge came in at 94.86. The low of that selloff was 94.87 (red arrow), for a near-perfect validation of support at that trendline.

The problem with that was, however, that GS had to rally off that successful retest into immediate overhead resistance at the broken neckline (horizontal orange line) and, as the rally unfolded, it was a Bear Flag (in red). That setup favored The Bears to successfully defend the neckline and send GS back for some kind of retest of the 94.87 early session low.



The Bulls didn't defend their near-perfect early retest of the Wolfe Wave. The Bears busted GS down to 94.65, but then The Bulls came back and broke out of The Channel (in white), and were back above the top of the Wolfe Wave. Hm-m-m...

I bought 1,000 GS at 95.11 on the pullback to the EMAs, but they didn't provide support. Sloppy...sloppy...sloppy, but I held with a mental stop below the 94.65 low of The Channel.



Normally, I would be drooling over this morphed Triple Nested Channel breakout, like I was on Wednesday (LOL), but I wasn't best pleased with The Bulls' repeated retests of the top of the Wolfe Wave, so I used tight stops on the rally, raising my stop as GS went higher. The Triple nested Channel breakout put 96.35 IN PLAY

95.73 - High of the Channel
94.65 - Low of the Channel

95.73 - 94,65 = 1.08 points of upside on the breakout at 95.27.

95.27 + 1.08 = Target: 96.35 IN PLAY



These two higher stops (horizontal red lines) were very close to each other. Given the Bulls' sloppy performance, I didn't want to see any "lower lows" and was concerned that I'd have to sell into fast market conditions on the downside if they both got taken down. GS was half way to the 36.35 target, so I was content to sell when the higher stop (35.75) got busted.



The lower stop (35.63) held, and the target of 96.35 got MADE about ten minutes after I sold. Curses! LOL.



From Friday morning:

"Technically, GS still is broken out on a closing basis, but it theoretically could continue to "walk down" the upper trendline...down...down...down, but still would be broken out."

You see what I meant by that. GS still is broken out, but it hasn't done anything on the upside since the breakout and still is testing the top of the Wolfe Wave/Falling Wedge. That said, The Bulls are beautifully positioned for earnings if they can hold up here and if the company comes out with anything positive.



Gain: $1,200

GOOG And GS

GOOG reported earnings after the closing gong and was trading higher, in the low $590's last evening. We'll see if it holds up in regular hours. That puts GOOG up $110 off the Stifel Nicolaus downgrade low of $480 on the morning of October 4, at which time GOOG double-bottom in the intraday chart, at 480...480 (see last week's posts on GOOG).

A few observations on the daily chart, which would apply to ANY chart:

(1) When GOOG broke down below the Rising Wedge, then CLOSED back inside the wedge on September 27, that presented "Ye Olde Knuckle-biter" to The Bears. The high in that session was 547.05. The candle was a "possible" Bearish Inverted Hangman, if The Bears could knock GOOG out of the Rising Wedge and take the stock down again.

The Bears were successful, and "Ye Olde Knuckle-biter" inside the Rising Wedge turned out to be a "One Day Wonder." GOOG went down and the 490.86 target got MADE, but the 486.82 target did not. Strategy-wise, if The Bears took "at least 'some' profits when the 490,86 target got MADE," they did alright if they covered the next "Ye Olde Knuckle-biter," which was much more than a "One Day Wonder," as we can see.

(2) The October 7 close was just slightly inside the broken neckline. The Gap Up opening in the next session of ten dollars, to $525, was well inside the broken H&S Top and was a HUGE warning to The Bears. On a gap up like that, the inclination of The Bears is to "hope" for a Gap and Crap, and for a chance to cover their shorts at a lower price. The Bears got a pullback of less than two dollars, then GOOG powered higher and closed near the high of the session, at 537.17. UH-OH for The Bears.

(3) When a H&S Top gets broken to the downside, a move back above the neckline is a warning to The Bears ("Ye Olde Knuckle-biter"), a move above the Right Shoulder high is another warning, and a takeout of the high of The Head is yet another warning because, as long as the stock trades above the high of The Head, the measured move from The Head to the neckline is IN PLAY on the upside! Yeeks.

Eyeballing it, the target looks to be roughly 604.00 IN PLAY, as long as GOOG trades above the 558.52 high of The Head.

And, speaking of "Ye Olde Knuckle-biter"...



... From yesterday morning on GS:

"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."

After all of the nice chart work that The Bulls constructed in Wednesday's session, The Bears managed to gap GS down at the open and send the stock back for another retest of the top of the Wolfe Wave/Falling Wedge, which came in yesterday at 95.60.

I wasn't real fond of a second retest, but since The Bulls were holding steady in the 95.50's and above (horizontal white line), I went ahead and bought 1,000 GS at 95.57. The top of the Wolfe Wave/Falling Wedge didn't hold up, as support. The Bears knocked GS down below 95.00, which was more than just a nominal (in name only) break of 95.60. I was holding "Ye Olde Knuckle-biter." UGH. I threw it in on the next rally, at 95.20.



GS put in a low at 94.52, then formed and broke out of this Cup & Handle. It also was back above the 95.60 top of the Wolfe Wave/Falling Wedge, but I didn't like the fact that it had gone a dollar below it on the selloff to 94.52. The Bulls "done me wrong," so I passed on the breakout. LOL.



Sloppy...sloppy...sloppy.

After the upside breakout, The Bulls got thrown back inside The Handle, then they rallied, then they got sent back inside The Handle again. Yeesh.

The pattern in orange is a "possible" H&S Top. The Bulls managed to morph TWO of those into Falling Wedge upside breakouts on Tuesday and Wednesday, so they could do the same here, but they'd better look sharp.



As I've said many times, Falling Wedge breakouts are my least favorite of the pattern breakouts, and this is a good illustration of why. Technically, GS still is broken out on a closing basis, but it theoretically could continue to "walk down" the upper trendline...down...down...down, but still would be broken out.

Wolfe Wave breakouts are "supposed to" result in very sharp moves to the upside, toward the target line (Black #6). We got a bit of that on Wednesday's breakout to 101.13, but yesterday's perfomance from The Bulls was dismal.

An earnings beat could propel GS to the target. They're due out October 18, I believe. Check me on that.



Loss: $400

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