Lessons From Goldman Sachs Daily Chart

Goldman Sachs (NYSE:GS) is coming into Fibonacci resistance on a negative momentum divergence.  Let’s look at this current development as well as learn a few lessons - such as a clear “Three Push” example - on its daily chart.

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First, let’s look at the “Three Push Reversal” pattern that formed on Goldman’s September, October, and November lows.  We had three relatively even-spaced symmetrical swings down to new lows, each one forming a positive momentum divergence in the 3/10 Oscillator.  If you look closely, each swing formed on a lower volume reading, which was also a type of divergence (the urgency to sell was reduced on each swing).

Price formed a hammer (candle) on the third and final ‘push’ to new lows, which was an aggressive buying signal that worked out very well.  Price has since doubled from this area.

Now let’s move from the lesson in the past to the real-time analysis.

Goldman Sachs is struggling to overcome the $125 area, which represents the 50.0% Fibonacci retracement from the May 2008 highs to the November lows.  A Negative Momentum Divergence has formed under price as we have moved to new highs (the momentum high registered in late March though price has moved higher from this level).

A slight negative volume divergence has also set-up as well.

Bulls have managed to ‘hug’ the 20 day EMA all the way up, and that currently rests at $117.20.  A breakdown of this price will almost certainly set-up a quick ‘magnet trade’ or sudden retest down to confluence support (of the 38.2% Fibonacci retracement and the rising 50 day EMA).  Failure there would deal a devastating blow to the bulls, and could send the stock back down to test the $75 level… but that’s far into the future.  Let’s try to take it one swing at a time for best results and take in new information as it comes.

For now, it appears the $125 area is holding as key resistance.  If taken out, the bulls would have scored a major victory and we could see price continue to rise in its amazing fashion.  So, watch $125 very closely in the coming days.

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