Monday, January 3, 2011

Trade Update: GS

If you want a glimpse of the scope and power of the high frequency trader, plunger protection team induced bid rigging and market manipulation gripping the market, take a look at the volume on the chart of Goldman Sachs and pay homage. The stock is up almost $175 on a whiff of air. With that anemic volume there is absolutely no reason for Goldman Sachs to be trading in three digits, which shows you the power of two houses trading their shares back and forth again millions of times a day. When Goldman Sachs does fall the crash will be mighty, but until then Goldman is our inflation put.

We first entered Goldman Sachs long by a quarter position at $162.25. We picked up another 25 shares today at $172.67. You can see on the chart how the shares have just poked above resistance at $170 and the stochastics are not bad, turned up at 50%. We will wait until they surpass $175 before finishing out our position. Hopefully by then we can set stops such that we lock in a reasonable profit. Until then our stop places at basically a breakeven trade.

Now look at the shares in the 15 minute time period. This gives you a better look at the break above resistance and also the gap at which I placed the stop. If the shares of Goldman Sachs are really going to run back up into the $200 range, then you would not expect for it to trade back down into the gap that opened up this morning. At least that's my thinking when I put the stop at $168.50.

Make no mistake about it Goldman Sachs is still in a 52 week down trend and the line from a high of $186.41 in April of 2010 to today's close proves it. I believe the downtrend will continue, but it looks like quite a battle is shaping up at the $190 zone. Ours is not to guess, rather to trade the break.

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