Sunday, August 28, 2011

Trade Update: GS

Wow! That's not illegal, but it should be. Look at what the specialist did to Goldman Sachs on Thursday morning. He gapped the shares up eight dollars at the open and then just let them fall back. Why not, he'd already gotten his and gotten out.

I'll be honest with you the only thing that kept me from getting out was just that Ameritrade isn't fast enough to catch that, but you should understand what you're looking at. Whenever you see a gap like that it means that the specialist just went out and bought himself a bunch shares the night before. Then on the following morning, turned the dial and sold them at the open. If you ever wonder why there's so much volatility in so many the open, there's your answer.

Not that there's anything you can do about it. The specialist owns of the book. That means he can see every open position and every stop and he has control of the price of the stock. He can bring the price down to stop you out and then with the shares he just bought from you run the price right back up again. No one can see because it's illegal to look at his books, but it doesn't matter. Even if he showed you the book, it's legal for him to do that. His criminality is only constrained by the degree to which it goes unnoticed by investors.

After the gap up at the open, the shares dropped a whopping $10 all the way down to $108. From there they recovered to $110 and closed that day back down at around $108. The next morning you can see they tested the $108 level again before closing at $112 for the week. So, we have put in a double bottom at least in the fifteen minute chart.

Now look at the six month chart in the daily time frame. Look at the support at $110 in early August, and then the failure at the same level later in the month. With the shares resting at $111.75 I am not so confident to say that Goldman Sachs has broken resistance, but I think the chart shows that it is important for the stock to stay above $110. Also the stochastic is in good shape with the red line separating from the blue line.

Right now we are long 50 shares at $109.62. So, our maximum risk is $168.50. Let's see what happens after the open tomorrow, if there is an open tomorrow and then think about putting more shares on and/or moving our stop up.

Buy 50 shares of GS at $109.62
Stop @ at $106.25

No comments: