Saturday, August 6, 2011

Trade Update: GS

Goldman Sachs GS keeps drifting steadily lower. You can see where it broke $130 support in July, dropping all the way to $125 on the 18th. The shares recovered to $140 by August 25th before falling back to @125.18 where it closed last night.

Goldman Sachs looks like it is setting up to put in a double bottom at $125, but that double bottom will not be technically confirmed until the shares pass through $140 again. We usually don't enter double bottoms until they are confirmed on this blog, but who wants to give up $15 of the run to the confirmation point.
so, what to do?

Lets look at the stochastics, they are down and going down faster judging by the way the blue line is pulling away from the red line. Also the MACD lines have both turned over and started down. This does not give me confidence to take a chance and go long at $125.18

One last thing to notice is how Goldman Sachs is hugging the bottom of the Bollinger Band. You don't usually buy the bottom of the Bollinger Band, but if you are short you always cover there. Point is $125.18 is not an entry point. So, what to do?

Well price is the final arbiter of the trade. So, we could enter with 25 shares on any strength with say a two dollar stop. On the other hand it would be more comfortable to short Goldman the same way on a break below $125.

All we know for sure is that I jumped the gun on Goldman on Friday and it cost us $100. Lets try again and make it up plus some.

Buy 1/2 GS @ $128.35
Stop at $126.35

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