Goldman Sachs Stock in Trading Range Ahead of Earnings

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Goldman Sachs Stock in Trading Range Ahead of Earnings

On December 26, 2018, Goldman Sachs Group, Inc. (GS) had a “key reversal” day. This happened when the stock hit a 52-week low of $151.70 before closing the day at $162.93, which was higher than the December 24 high of $160.00. As 2019 started, this purchase signal laid the foundation for gains.

The stock closing above its yearly pivot at $186.87 on Jan. 16 was critical to the early-2019 rise. On July 26, the stock reached its 2019 high of $222.24. This high was higher than its second half semiannual pivot of $200.49, which became a magnet between August 5 and October 10. The higher end of the trading range is marked by the July 26 high, while the lower end of the range is shown by the yearly pivot at $186.87.

According to Macrotrends, Goldman stock is attractively valued, with a P/E ratio of 8.38 and a dividend yield of 2.50%. This investment bank and Dow Jones Industrial Average component is projected to announce earnings per share (EPS) in the $5.03 to $5.14 range when it publishes results before the opening bell on Tuesday, Oct. 15. The investment banking behemoth has outperformed earnings per share projections for nine straight quarters.

In the long run, Goldman stock has fallen 44.8% from its all-time intraday high of $275.31 on March 12, 2018 to its low of $151.70 on December 26. The stock finished at $204.68 on Friday, Oct. 11, up 22.5% year to date and in bull market territory at 34.9% above the low.

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The daily chart for Goldman Sachs

Refinitiv XENITH

The daily chart for Goldman indicates a 44.8% drop from the high in March 2018 to the low on December 26. Following that is a trading range of $186.87 to $222.24. The yearly pivot, found by entering the December 31 closing of $167.05 into my proprietary analytics, is at the low end of the range.

My analytics also took into account the stock’s mid-year closing of $204.60, and the stock’s semiannual pivot for the second half of 2019 is $200.49, which was a magnet between Aug. 5 and Oct. 10. Another input to my analyses was the third-quarter finish of $207.23, which led in a fourth-quarter value level of $191.59 and a hazardous level for October of $206.48. Last week, the stock closed between these two critical levels.

The weekly chart for Goldman Sachs

Refinitiv XENITH

Goldman’s weekly chart is bearish, with the stock trading below both its five-week modified moving average of $205.80 and its 200-week simple moving average, or “reversion to the mean,” of $209.00. The weekly 12 x 3 x 3 slow stochastic reading fell to 52.85 last week, down from 59.81 on October 4. The stock ended 2019 with a rating of 6.32, significantly below 10.00, indicating that it was “too cheap to ignore” and therefore a buy, which aided the start of the 2019 surge.

Buy Goldman Sachs shares on weakness to the quarterly and annual value levels of $191.59 and $186.87, respectively, and sell on strength to the 2019 high of $222.24. Semiannual pivots are $200.49 and monthly pivots are $206.98, respectively.

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How to apply my risky and value levels: The latest nine monthly, quarterly, semiannual, and annual closing are used to calculate value and risk levels. The first set of levels was determined at the closure on December 31, 2018. The initial yearly level is still in effect. The end of June 2019 saw the establishment of new monthly, quarterly, and semiannual levels. The semiannual level is still in effect for the second half of 2019. The quarterly level shifts at each quarter’s conclusion, therefore the closing on September 30 set the level for the fourth quarter. Because monthly levels vary at the end of each month, the closing on September 30 created the monthly level for October.

My hypothesis is that nine years of volatility between closing is sufficient to infer that the stock has factored in all probable bullish and negative occurrences. Investors should purchase shares on weakness to a value level and sell shares on strength to a risky level to capture share price volatility. A pivot is a value or danger level that has been breached within its time period. Pivots operate as magnets that are likely to be tried again before their time horizon ends.

How to utilize 12 x 3 x 3 weekly slow stochastic readings:I chose 12 x 3 x 3 weekly slow stochastic readings after backtesting numerous techniques of measuring share-price momentum with the goal of finding the combination that produced the fewest false signals. I did this after the 1987 stock market meltdown, and I’ve been pleased with the results for more than 30 years.

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The stochastic reading for the stock encompasses the previous 12 weeks of highs, lows, and closes. A raw assessment of the disparities between the highest high and lowest low vs the closing is available. These levels are tweaked to allow both quick and slow reading, and I discovered that slow reading worked best for me.

The stochastic reading spans from 00.00 to 100.00, with values over 80.00 considered overbought and those below 20.00 considered oversold. Recently, I noticed that equities tend to peak and fall 10% to 20% or more quickly after a reading climbs over 90.00, which I refer to as a “inflating parabolic bubble,” since a bubble inevitably bursts. A reading less than 10.00 is frequently referred to as “too cheap to ignore.”

The author has no holdings in any of the stocks mentioned and has no intentions to start new positions in the next 72 hours.

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