Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE

SUPPORT & RESISTANCE


Goldman Fails At Broken Support

03/14/07 11:04:17 AM
by Arthur Hill

Goldman Sachs failed to move back above broken support on the latest rally, and a continuation lower is in the cards.

Security:   GS
Position:   Sell

Goldman Sachs (GS) broke support with a gap down and sharp decline in late February (Figure 1). The move also broke the 50-day moving average and occurred on high volume. The combination of support breaks and high volume points to a trend change for this key stock. The gap down should also be considered a breakaway gap as long as it remains unfilled. Breakaway gaps start new trends, and a new downtrend is underway as long as this gaps holds.

FIGURE 1: GOLDMAN SACHS, DAILY. GS broke support with a gap down and a sharp decline in early February.
Graphic provided by: Telechart 2007.
 
Broken support turns into resistance. This is a basic tenet of technical analysis, and traders should be on guard when a stock returns to broken support. GS actually established a support zone around 208–210, and this support zone turns into a resistance zone. The 50-day simple moving average (SMA) offered support during the advance, and this indicator now marks resistance. Both the support zone and the 50-day affirm resistance around 208–210, and this is the level to beat.

FIGURE 2: GOLDMAN SACHS, DAILY. Resistance is now around 208–210, which is reinforced by a bearish engulfing pattern.
Graphic provided by: Telechart 2007.
 
Resistance around 208–210 is further reinforced by a bearish engulfing pattern on March 13 (Figure 2). The stock opened strong and closed weak to totally engulf the prior white candlestick. High volume validates this bearish candlestick reversal, and I would now expect at least a test of the early March low. Given the depth of the prior decline, traders should not rule out a decline to the next support level around 184.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

Traders' Resource Links
TDTrader.com has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

Comments

Date: 03/14/07Rank: 4Comment: 
Date: 03/24/07Rank: 3Comment: 
PRINT THIS ARTICLE





S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2019 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.