Goldman Sachs Back Below $100. More Pain Ahead?

Over the past 52-weeks, Goldman Sachs GS has gone from a 52-week high of $174.36 (January 18th), to a 52-week low of $84.27 (October 4th), to its current trading price at $99.67. As the numbers clearly indicate, the once immortal Goldman Sachs is not immune from the financial woes gripping the rest of the market – in fact, the stock has been much weaker than its counterparts in the financial industry. After undergoing a vicious $8.91 (8.2%) plunge on Wednesday, investors are wondering how much more pain (if any) lies ahead for Goldman shareholders. Wednesday's Drop Could Mean More Gloom The technical picture on the price chart indicates that Goldman Sachs could come under more selling pressure, as the stock's short-term uptrend, which began on October 4, was broken during Wednesday's decline. As the 10-month daily chart below shows, this breakdown marks the continuation of the long term downtrend, which began in January of this year. If the market continues to selloff, a test of the 52-week low at $84.27 appears imminent – 15.5% lower than Wednesday's close. The $94 - $95 level provided some support in early October, and is the only existing area of support on the chart between the current trading price and $84.27. An Upside? Despite the fact that the short-term uptrend was broken with such conviction, as the market has shown us time and time again, broken trades/reversals can lead to huge moves. $100 is a key psychological level. If shares of Goldman can find some support and climb above that price, it could scare shorts out of the trade and provide a nice percentage jump – at least in the short term. The nearest resistance comes into play at the 50-day simple moving average (one year daily chart), which currently resides at $102.24. The long-term downtrend line currently intersects at $115, providing primary resistance and a lot of room to run should the stock manage to push back above $100. Volatility Volatility continues to remain elevated for shares of Goldman Sachs Goldman. The 14 day Average True Range (ATR) is currently reading 5.18. Based on a closing price of $99.67, this means the stock is moving 5.2% (on average) from day to day. Trading this stock is not for the squeamish, as it is extremely erratic. During the 2008 meltdown, wild swings and intraday moves in excess of 10% were commonplace. Considering the current global financial situation, it is not unreasonable to assume that such moves will occur again. Goldman Weak Compared to Other Financials The Financial Select Sector SPDR fund XLF is an ETF which tracks the financial sector. As the year-to-date daily comparison figure below shows, when examining the performance of the two, Goldman has more than doubled the losses experienced by the XLF thus far this year– plunging 40.3% compared to an 18.5% drop for the XLF. That discrepancy is a strange occurrence considering that Goldman Sachs has historically been considered “best of breed.” This deviation from the financial sector could indicate that such a title is no longer warranted and that significant problems may lie ahead for the firm.