BreakOutArtist
Short

Taking a Short at Goldman Sachs

NYSE:GS   GOLDMAN SACHS GROUP INC
495 3 6
Hi all,

Here's an idea that is about going short a famous bank.

1 Goldman Sachs ( GS             ) has been channeling steadily upwards from May 2012 up to June 2015.
This is a significant move where price rises from $100s to just over $210s.
Yes, the price action is noisy so, only patience in a long term trend can net you this kind of over 100% return.

2 However, the bulls got exhausted at $210s and we observed a clear Head & Shoulder pattern formed, as marked out.
The neckline of 171.50 was broken cleanly on 01 June 2016. The breakout reached as low as $140s, before undergoing the retracement back to $165s recently.
This Head & Shoulder breakout signals that the bullish trend in 1 is reversed into a bearish trend .

In other words, price will try to trade lower to reach $140 and beyond.

3 Since the trend is bearish , next we look at the RSI (14), as a guide on when to enter short.
This is done by matching the price peaks versus corresonding RSI peaks,
We observed that the Head of the H&S coincides with a RSI of around 70.
The next obvious price peak was around 200, matching a RSI of around 69.
This forms a sort of a RSI resistance, which will help to indicate the next possible peak.

Currently, we note that RSI has done a V turn close to the RSI resistance, with price forming the next possible peak, just after the $170.

In other words, it is likely that 167 is the starting point for the next phase of the bearish move down.

4 Lastly, the price action starting from 22 June 2015 to now, is taking the form of a classic Elliott 5 Wave pattern.
This pattern fits well and coincides with the formation of the H & S pattern.
It is likely that price will attempt to move in the form of the 5th impluse wave, to complete this Elliott 5 Wave pattern.

Projection:
Given the observations made, we project that the next phase of bearish move has already started with the aim of taking price to $140 and lower.

Short Entry Condition:

Anytime from now, at a price no cheaper than 167.00.

Stop Loss:
Above 167.00.
If price moves beyond this point, it will prove our theory that 167 is the latest peak wrong and therefore remove the basis for going short.

Taking Profit:
This will be left to your decision and according to your risk profile.
You can either hold 100% all the way down or taking partial profits.
There are 3 places where you can consider taking partial profit along the way.

TP1: 150 is basically a point where you can conservatively take a bit of profit, just in case you have something to show for if the price moved back to break even subsequently
TP2: 140 is a critical point where price will decide whether to go lower or to form a double bottom pattern and neutralize the H & S pattern.
TP3: 128.50 is the holy grail where the breakout follows through all the way. Price may even carry on lower due to the general bearish drift of the trend.

Time Limit:
All short positions should be closed by 01 Aug 2016.

Summary:
A Head & Shoulder pattern, along with a possible Elliott 5 wave pattern, plus a RSI resistance indicates that GS             is starting up a bearish move towards 140 and below.

Have a Profitable Day~!
-BreakOutArtist
Red
6 months ago
Nice one!
Why do you say that the position should be closed by 01 Aug 2016?
Reply
BreakOutArtist PRO Red
6 months ago
Thanks all for the likes.

The main ides is this> If the price were to breakout, it ideally move swiftly reach the TP lines in a relatively short period of time.

No one is certain how fast or how slow price will go.
The next best thing we can do is to do an estimation, based on recent similar breakout moves.

snapshot


So we draw a line tracing the strong move from 217 to 171.
This line A is an example of the speed will move in a bearish breakout phase
Another example B can be drawn from 198 to 140.

Next we, copy and project lines A & B from roughly where the proposed price peak is, at 166.
We look at where these lines intersects the TP3:

This will form the possible dates by which the price will reach 127.50.
What I did was to give the slower date a slight buffer, to set an absolute time limit to close the short no matter at what price.

This is because breakout moves are relatively short periods. So holding the position longer than expected indicates that the price momentum is just not there and will run the risks of loss.

Reply
Red BreakOutArtist
6 months ago
Ok, thanks for the explanation :)
Reply
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