Bank Stock Conquers Long-Term Trendline

GS has been showing signs of life recently

Nov 2, 2022 at 11:27 AM

Goldman Sachs Group Inc (NYSE:GS) stock is showing signs of life. Since June, the security has staged multiple pullbacks to its ascending 36-month (or three-year) moving average, as well as its 2018 peak. Furthermore, the equity just pushed above its 252-day moving average, which acted as resistance in September, just one day after moving above a trendline of potential resistance from its lower highs since August.

The equity is also fresh off a positive post-earnings reaction, and last week closed above a trendline connecting lower highs since November 21. Plus, GS is above the $336 level, which is 1.2 times its June closing low, and $339, which is 0.8 times its all-time closing high.

Short interest hit its highest level in over two years in mid-August. Now, shorts are in the early stages of covering, with total short interest still about 20% above this year’s low point in May. Anyone that shorted since May is now underwater.

Analysts have been growing increasingly cautious on GS despite its recent rally, which could signal a big shift in trend, with several downgrades since July. Our recommended January 2023 call has a leverage ratio of 4.8 and will double in value on an 11.8% pop in the underlying shares.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this GS commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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