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
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