The American multinational investment bank and financial services company headquartered in New York City that offers services in investment management, securities, asset management, prime brokerage, and securities underwriting, Goldman Sachs Group Inc. (NYSE: GS) seems to be getting ready for a price surge according to its latest charts.
Bullish Indications
#1 Double Bottom Breakout support: GS’s daily chart shows that the stock has currently taken support at the breakout level of a double bottom pattern. The double bottom pattern is marked in pink color. A double bottom pattern is a strong bullish pattern and a breakout from it indicates a possible upmove in the short term.
Daily Chart – GS
#2 Price above MA: The daily chart shows that the stock is trading above its longer-term moving average of 200-day SMA. This implies that the bulls are still having control.
#3 RSI Oversold: In the daily chart, the RSI is currently near oversold levels.
This implies that a possible reversal is around the corner.
#4 Below lower BB: The daily chart shows that the price is currently below the lower Bollinger band.
This seems like a bullish setup, as a buy signal is generated when a candle is formed below the lower band and is immediately followed by another candle above the lower band.
#5 Downtrend Broken: As you can see from the weekly chart, the stock had recently broken out of a downtrend.
The downtrend line has been marked as an orange line. After the breakout, the stock has now started moving higher. This shows that the downtrend is now over and the trend has reversed.
Weekly Chart – GS
#6 Ascending Triangle Pattern: The weekly chart shows that the stock has broken out of an ascending triangle pattern. An Ascending Triangle pattern is a bullish pattern and is marked in the chart in purple lines. A breakout from this pattern usually indicates bullishness.
#7 RSI nearing oversold: The weekly chart shows that RSI is nearing oversold levels. This points to the possibility of an upcoming reversal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GS is above yesterday’s close. This translates to a price of around $228.60.
TP: Our target prices are based on the ascending triangle pattern breakout. The first TP is $235 and the second TP is $250.
SL: To limit risk, place a stop loss at $224.50. Note that this stop loss is on a closing basis.
The target potential upside for this trade is nearly 3% to 9% in the next 4 months.
For a risk of $4.10, the target rewards are $6.40 and $21.40. This is a nearly 1:2 and 1:5 risk-reward trade, which means that this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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