At a glance:
Primary Trend is Up
Secondary Trend: Consolidation after Correction
On closer look, these are what I see:
Although bulls have been in a steady climb since 2005 with only 3 relatively mild bearish months in 2005 and 2 in 2006, the picture changed drastically in 2007, where bears took control half the time.
Granted that the beginning of the 4th quarter saw bulls taking just 2 months to accomplish what the bears took more than 3 months to pull off, bears had succeeded - month after month for 5 consecutive months - in recovering all that they've lost, and price was back to around where it opened in Sept 07, from where the bulls began their 2-month rally.
The length of Feb 2008's candle is an indication of increasingly bearish sentiments.
The following month, however,saw the bears taking a break.
One would think that the hammer that formed would have given buyers some confidence to come in since a hammer after a strong downward move typically spells trouble for the bears, especially when the low of the hammer is reinforcing a support from 2006.
But that didn't happen.
It didn't seem that the bulls were ready to take the helm. Although we did see some buying interest in the month that followed, the rally was short-lived. The month after saw bears taking from the bulls as much as 75% of what the latter had gained.
What I'm seeing is that although the bears have gone on another holiday, the bulls are hardly a threat. In what is primarily an uptrend since 2003, the bears are making increasing bigger corrections and for longer periods each time.
Nobody can predict what's to come, but it's logical to infer that the prevailing sentiments (well, charts' all about sentiments, isn't it?) towards the ailing financial sector, rising oil prices, and a sluggish US economy will definitely continue to put downward pressure on GS' prices (overlay a dow and S & P chart on GS' and you'll see them dancing together, with GS sometimes taking the lead!).
I'm not optimistic about GS's rebound (at least not within this year) from the 50% Fib level it's sitting at now to its high in Oct 07.
Again, simply put, I can't see any indication of a major reversal to the upside for GS in the next few months to come. At least not according to what I see on my monthly chart.
Zooming in to my weekly chart, For the Week of Jul 7
I'm seeing patterns that counter one another:
- A hammer in late Aug sending GS up, only to have
- A shooting star in late Oct took it all the way down
- A bullish engulfment disrupted the plunge but didn't send prices back up immediately despite the long bullish candle
- A short rally ensued after 4 weeks of consolidation and found resistance at April's support, which was also resistance from Dec 2006
- GS corrected to support level shown in red dotted line (reinforcing late Aug's hammer's support)
- A bullish outside bar in the week of Jun 9 was formed and GS rallied for a week
- A bearish engulfing pattern is formed in the week of Jun 23, but whether it will halt the rally will depend on how determined the bulls are and on this week's general market sentiments.
If oil prices indeed continues to slide (Brent crude oil chart showing bearish divergence and also a bearish harami), market's going to move up accordingly. When that happens, and if GS' going to trend with the market, we should see a spike in GS's prices. Why? Because for GS to move up against its longer-term downtrend, there will have to be a heap of optimism and/hence momentum!
So this is what I see:
- Oil has come down by $1.75 from thurs, sending Dow up
- GS has a reinforced support at around 167
- On its intraday chart, GS has closed higher than it's previous day's high on an uptrend (on 5 min chart)
Putting everything together, it seems unlikely that GS will drop today.
For the week, it looks like GS will trade within the box range defined by the the support at 167 and resistance at 184. If it breaks through the ceiling of the box, it's likely to aim for 203.5
It looks possible to me that GS could be trading up today.
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