Investment banking giant The Goldman Sachs Group, Inc. (GS) is a member of the Dow Jones Industrial Average and reports its first quarter earnings before the opening bell on Tuesday. Goldman stock has slightly outperformed the Dow 30 with a fractional year-to-date gain of 0.5% versus a loss of 1.5% for the average. Goldman stock closed Friday at $255.92, up 6.9% since its Feb. 9 low of $239.29 and down 7% from its all-time intraday high of $275.31 set on March 12.

Analysts expect Goldman to post earnings per share between $5.67 and $6.03 when it reports first quarter results on Tuesday. The company beat estimates in its past three quarters, and after its previous report on Jan. 17, a negative knee-jerk reaction saw the stock test and hold its 50-day simple moving average at $248.84. This was followed by a rally to $273.79 into Jan. 29 after the Dow 30 peaked at 26,616.71 on Jan. 26. The stock has been extremely volatile since this reaction.

For 2018, a trade war with China would hurt earnings for Goldman. Even so, earnings estimates have solidified moving into Tuesday’s report. At issue is how much of a positive earnings surprise is priced into the stock. Keep in mind that JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Wells Fargo & Company (WFC) beat estimates on Friday, but each of these “too big to fail” money center banks slumped by about 2%. (See also: Why Big Bank Stocks Are About to Crumble.)

The daily chart for Goldman Sachs

Daily technical chart showing the performance of The Goldman Sachs Group, Inc. (GS) stockCourtesy of MetaStock Xenith

Goldman stock has been above a “golden cross” since Oct. 24, when the stock closed at $244.84. A “golden cross” occurs when the 50-day simple moving average climbs above the 200-day simple moving average and indicates that higher prices lie ahead. The stock closed Friday above its 200-day simple moving average of $243.73 and below its 50-day simple moving average at $259.37. The stock is well above its semiannual value level of $238.24 and well below its monthly risky level of $272.53.

[Check out Investopedia’s of the Technical Analysis course on the Investopedia Academy to learn about analyzing stock charts using moving averages.]

The weekly chart for Goldman Sachs

Weekly technical chart showing the performance of The Goldman Sachs Group, Inc. (GS) stockCourtesy of MetaStock Xenith

The weekly chart for Goldman Sachs ended last week negative, with the stock below its five-week modified moving average of $256.15 and well above its 200-week simple moving average at $200.70, which is also the “reversion to the mean,” last tested during the week of Oct. 21, 2016, when the average was $170.84. The 12 x 3 x 3 weekly slow stochastic reading ended last week at 45.33, down from 49.55 on April 6.

Given these charts and analysis, I recommend buying Goldman shares on weakness to my semiannual value level of $238.24 and reducing holdings on strength to my monthly and quarterly risky levels of $272.53 and $286.71, respectively. (For more, see: How Goldman Sachs Makes Its Money.)

Let’s block ads! (Why?)

Read More