Key Price Compression Levels to Watch in GS

Shares of Goldman Sachs (NYS: GS) stock remain trapped between two key price levels as traders await a breakout from this range.

Let’s take a focused look at the daily chart of Goldman Sachs (NYS: GS) and pay specific attention to the two key levels to watch on the chart.

Taking a quick look, we see price compressed specifically between resistance at the 200 day SMA (and 50% Fibonacci retracement) at $157.50 and support from the 50 day EMA at $146.90 ($147 for reference).

Those are the key levels to watch for a larger range breakout, but there’s an even smaller range that short-term and day traders should be watching.

It’s the compression between the 38.2% Fibonacci retracement at $151 and the 20 day EMA at $149.30 (call it $150 for a round-number reference) and the same 50 day EMA price at $147.

Thus, the “IF/THEN” statements in GS may be the following:

“IF price breaks overhead short-term resistance at the $150 level, THEN expect a play up to the next higher resistance at $157.”

or

“IF price fails to hold support at the $147 level, THEN expect a further sell-off and break of support to target a retest of the $130 to $135 level.”

As a trader, you’re often better by assessing charts in terms of “IF/THEN” statements/expectations as opposed to “Well, there’s support at $147 so Goldman’s going to go up so I’m buying.”

What if it doesn’t?

If you want to dig a little deeper than the simple levels I’ve referenced here, then look at the classic negative momentum divergence that undercut (disconfirmed) the swing high at the $157 level.

The divergence and push into confluence resistance  set-up a good short-sale opportunity with a stop above confluence resistance at the $158 or $160 area to play for a retest of daily EMAs at the $150 to $145 area – which is where we are now.

Now we’re at another “technical decision node” where price can either bounce upwards off support here – placing a stop under $147 – or slice through the support (shorts would place their stops above $147 in that case).

What will happen?

The proper question should be “what do I expect and where should I locate my stop/what is my risk?”

Or wait for a breakout signal – above $150 or beneath $147 – to put on a trade and join the winning side – bulls or bears – rather than trying to make an educated guess as to whether bulls or bears will prevail.

Either way – watch these levels for clues as to the next likely move ahead in Goldman Sachs (GS) shares.

Corey Rosenbloom, CMT
Afraid to Trade.com

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