4 Trade Ideas in Goldman Sachs: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

Goldman Sachs, $GS, is on the verge of a major breakout. The stock has hit a high near 251 in 2007 before dropping precipitously during the financial crisis to a low under 50, a drop of over 80%. Since then it had a strong rise through 2009 and then a 3 year pause before moving back higher in 2013. A 3 year bull market found a top in mid 2015 and pulled back again. This time it reset 36% lower with a double bottom in 2016 as shown in the chart below. This has not been a straight up 8 year bull run for Goldman Sachs.

The stock confirmed that double bottom at the end of October and then raced higher in November after the election. It stopped just short of the 2007 high in December and consolidated for over 2 months. Last week saw new movement in the stock, pushing up out of the consolidation zone and to the 2007 high. As it does so it establishes a target to 317 with a natural spot for a stop loss near 230. Momentum is a bit hot but that is a good thing on the weekly chart.

Digging into the weeds a bit the stop does go ex-dividend next week on the 28th and then is expected to report earnings next on April 18th. This will be well after the March 15th FOMC meeting that could be a bigger catalyst. Short interest is very low at just over 1%.

The options chains show little bias for any movement this week. The March options have biggest open interest below at the 240 strike though. The April options chain would also suggest a net pullback but it has much more open interest above on the call side at 260 and 270 and then even 300.

Goldman Sachs, Ticker: $GS

Trade Idea 1: Buy the stock now (over 246) with a stop at 230.

Trade Idea 2: Buy the stock now (over 246) and add an April 250/230 Put Spread ($6.40) while selling a July 270 Covered Call ($6.50 credit).

Trade Idea 3: Buy the April 255 Calls ($6.80).

Trade Idea 4: Buy the April 230/255 bullish Risk Reversal ($4.25).

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which as the markets head into the holiday shortened week sees the equity markets continuing to look strong on the longer timeframe and getting overheated on the shorter timeframe.

Elsewhere look for Gold to continue to see an easier path higher while Crude Oil churns in a tight range. The US Dollar Index looks ready to reverse back up while US Treasuries are biased lower, should either break consolidation ranges. The Shanghai Composite continues to see a drift higher and Emerging Markets are pausing but also look good for more upside.

Volatility looks to remain at extremely low levels keeping a breeze at the backs of the equity index ETF’s SPY, IWM and QQQ. All 3 look strong on the weekly timeframe, despite the moves higher. On the shorter timeframe the SPY and QQQ are moving deeper into overbought territory and may need a pause or pullback, while the IWM is consolidating. Use this information as you prepare for the coming week and trad’em well.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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