When the Fed pivot rally kicked off in October last year, Goldman Sachs (GS) got pulled along for the ride.
From its October 27 low, the financial services powerhouse rallied strongly. It gained an impressive 33% in around seven weeks.
But after making those gains, GS’s rally fizzled.
From early December to the present day, it has been stuck in a narrow sideways band.
Yet momentum has recently broken a key level. So today I want to check what’s in store from here…
Meandering Sideways
On the left-hand side of the chart below, you can see GS’s rangebound pattern from April through October.
The longer-term 50-day Moving Average (MA, blue line) meandered sideways. And the 10-day MA (red line) crossed it numerous times in both directions.
That’s a common sideways pattern.
Goldman Sachs (GS)
Source: eSignal
Throughout this rangebound period, the Relative Strength Index (RSI) fluctuated between the upper and lower parts of its range.
This action shows a shortage of buyers with long-term conviction about the stock.
That changed in late October. The RSI’s sharp bounce from oversold territory showed a clear uptick in momentum.
After that initial burst, GS’s rally developed further. The RSI broke up through resistance (green line) and gained traction in its upper band.
That strong up move coincided with the 10-day MA sharply accelerating above the 50-day MA. Both MAs then rose higher.
But as the chart shows, GS’s surge put the RSI well into overbought territory in mid-December (red circle).
The RSI made an inverse ‘V’ and tracked lower. As such, GS couldn’t resume its rally.
Instead, it tracked sideways as the RSI bounced along support (green line).
Take another look:
Goldman Sachs (GS)
Source: eSignal
The RSI only recently broke through support (showing declining momentum). So it’s going to become increasingly difficult for GS to maintain its current level.
The two MAs have been steadily converging since the start of the year. This hints that a potential crossover is in the cards.
And the GS recently closed below the 50-day MA for the first time since last November.
Ultimately, the chart shows that it’s coming under increased pressure.
So what should we look for next?
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Extra Confirmation
If momentum continues to slide as the RSI gains traction in its lower band, then that will continue to pull GS lower.
A sustained move into the RSI’s lower band could soon see GS test the $375 level.
I’ll also look for a potential crossover in our two MAs.
The 10-day MA accelerating below the 50-day MA would further confirm an emerging downtrend.
And the other indicator I’m watching closely is the MACD.
After topping out late last year, the blue MACD line crossed beneath the orange Signal line and tracked lower. It has flattened out over the past month.
If both lines break below the zero (0.00) line and accelerate lower (led by the MACD line), that will also confirm that GS has further to fall.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict