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Goldman Sachs (NYSE:GS) Ready To Play Catch-Up

 June 22, 2010 09:31 AM

(By: Scott Redler)  All the way back on January 22nd we started noting a very bearish head and shoulders pattern in Goldman Sachs (NYSE: GS) . The pattern measured a move down to 135, the sell-off ignited by fraud allegations, SEC suits and potentially game-changing financial regulatory reform.

The stock hit a low of 132.45 and now we are starting to look long. Goldman has lagged this market bounce and has had no power, but we are now seeing a big descending channel that should resolve to the upside. All the worst case scenarios for GS seem to have already been priced in, and it feels like there is no place to go but higher.

We bought some GS around 137 last week and will add to it if it finally breaks the downtrend around 140-141 with volume. The financial reform vote this week could be the catalyst. Although the legislation may be unfavorable, resolving the issue will remove the dark cloud of uncertainty hanging over the sector. Anything less than what has already been suggested will only add more fuel to the fire for longs. The first stop for the stock would be the 145 level, and then ultimately to 150-155.

I want to see volume and speed on that trade if I am going to hold big size for the entire move. We are market timers and it looks like the time has come for the banks to catch up to the rest of the recovering market. In the same mode, we are long a lot of JPM (NYSE: JPM) from last Thursday.


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