Goldman Sachs reported its fourth-quarter earnings yesterday, with an adjusted eps of $5.68, topping the $4.91 consensus on $7.83 billion revenue, beating the $7.61 billion estimate. Impatient investors rushed in and took the stock up 1.18 percent in the first 10 minutes. However, there was more to the report.
Goldman said it lost half of its trading business in bonds, commodities and currencies, YoY. That drove shares down 3.65 percent from yesterday’s closing price, to finally settle down at a 1.83 percent loss, its biggest daily loss since September 5.
A Technical Loss Of Direction
Technically, a warning was signaled yesterday when a high-wave candle formed. Its fluctuation with no meaningful change in the price reflects a loss of direction among investors and it generally precedes a reversal. Its appearance at the top of a range, a price level in which supply has been exceeding demand since December 13, highlights its significance.
However the plunge, which wiped out more than four days of gain, was supported by the range bottom – 50 dma (green) and uptrend line – which is also a rising channel-bottom.
This plunge, as massive as it was, is considered nothing more than a correction within an uptrend and follows its natural trading pattern within the range. Therefore, it provides a buying opportunity.
Trading Strategies
Long Position Within Uptrend
- Conservative traders would wait for evidence of the trend’s integrity with a peak higher than the December 22, $262.14.
- Moderate traders would wait for a potential return to yesterday’s $248.87, or the uptrend line.
- Aggressive traders may enter a long now, providing they can afford a stop-loss beneath the uptrend line, currently at $247, or at least below yesterday’s low; or afford the risk.
- Target: $270, the height of the range, which is a conservative 3 percent, half of the 6 percent between the two preceding peaks.
Long Position Within Range
- Conservative traders would wait for a return to yesterday’s low.
- Moderate traders would wait for a return to the range bottom, at $251.64
- Aggressive traders would enter now.
- Target: $261, range-top.