Today is the end of the quarter. Considering that we have had one of the best quarters in years, it would not be surprising to see the market close strong this afternoon. Why is that?...two simple words, "window dressing". What exactly does that mean? To put it simply, it means that portfolio managers typically report their holdings to their investors at the end of the quarter. And what better way to impress your investors, then to hold stocks that have been performing very well. In other words, portfolio managers tend to "dress-up" their portfolios, by buying the quarter's outperformers, and selling the laggards.
Therefore, stocks that have had a good quarter, often have a good couple of days at the end of the quarter as fund managers accumulate positions in those issues. For example, take Coke (KO), it has had crazy buy imbalances at the end of the close the last two days, probably due to some institutional investors trying to accumulate stock. It very well may have a large buy imbalance again today for the same reason, this would press a stock like KO higher into the close. Overall, since the entire quarter has been very strong, there could be some significant accumulation in a number of issues at the end of the day today.
These gains are typically short lived, as these stocks will often give back their gains in the following week or two. In any regard, if stocks do rally into the close, it may be a good idea to lighten up on some of your longs.
Friday, March 30, 2012
Thursday, March 29, 2012
What happened in Coke?
Coca-cola (KO) spiked up 90 cents right near the end of the close today, but then quickly fell back down. What happened? A crazy buy imbalance is your answer.
Wednesday, March 28, 2012
IS 1400 A TOP FOR NOW?
Since January, the S&P 500 futures has obliterated all major resistance numbers. For simplicity's sake, let’s identify those levels as 1250 (starting out with a gap and go on January 3rd), 1300, 1350 and 1400. At this time, the futures index has peaked at 1419.75 (during an overnight session) and has not been able to come within six points of that high ever since. In fact, for the last two days, the index has not been able to sniff the highs of the overnight sessions and has taken out the lows with ease. Quite a reversal in trend since the beginning of the year. The contraction of average daily ranges and choppy meaningless intraday activity may lead to an eventual increase in volatility. And when is volatility at the highest? When the market tanks. But before I get carried away let’s look at the numbers and the nature of the activity in the markets.
For the past month, Premarketinfo.com has preached about the gigantic institutional sell orders resting on the NYSE open book. In stark contrast, to the large orders that were present in the NYSE book during the low’s in October. Although many of these orders have been executed, who has been the buyers? Other institutions that are initiating new positions or High Frequency Traders finally succumbing to buying pressure from the already squeezed shorts. In almost all of these instances when the size is satisfied, the issue will go up a nickel or a dime and then tank as traders rush to exit their longs. On the other hand, there are times when the break out continues for a day or two, but more often than not the stock will slide back down over the course of that time.
From a fundamental perspective, this has not been a broad based rally by any means. It has been the technology sector (I mean AAPL), and as of late the financials have finally joined the party. Several of the S&P 500 Index components have not made new 52 week highs let alone multi-year highs (XOM, GE, JNJ). Even though the financials have rallied, GS, BAC and MS have in no way signaled the dawning of a run-away bull market. Along these lines, the Dow Jones Transportation Index has not even come close to the July 2011 highs.
So what can turn this market south? Of course, an earnings miss from AAPL would get the ball rolling, but that is not even a remote possibility according to Wall Street analysts. According to their estimates, AAPL will not be fully valued until every person in the world (over 12 years of age) has an I-Phone, I-Pad, I-Touch and Apple TV, and any other gadget that I cannot think of that will be invented.
If not AAPL tanking, then how about the financials retreating? Has BAC really improved its earnings and balance sheet to substantiate the doubling of it's stock price? At this time, they have not fully absorbed all the losses from the ill-timed purchase of Countrywide Financial. More importantly, those who find comfort in the recent stress test results should keep in mind that the circumstances that will ignite the next meltdown in the markets, will be unpredictable. Not an event that can be scripted by the Federal Government based on the events from the past. Banks make money by loaning out money and in this current interest rate environment, they would rather buy Treasuries with their cash than assume the risk of making loans.
So let’s put all these hypothetical examples behind us and look at the numbers. With the S&P 500 Index futures 25 points of its recent high, sellers are going to bring their offers down to get out or get short. Thus, 1400 will now become the focus, not 13,000 in the meaningless Dow Jones Average. Expect major resistance at 1400.00 and until there are three closes above 1420.00, 1400 will be a level to remember for the next few months. On the downside, three closes below 1380.00 in the June futures will be confirmation that a top is in for now.
For the past month, Premarketinfo.com has preached about the gigantic institutional sell orders resting on the NYSE open book. In stark contrast, to the large orders that were present in the NYSE book during the low’s in October. Although many of these orders have been executed, who has been the buyers? Other institutions that are initiating new positions or High Frequency Traders finally succumbing to buying pressure from the already squeezed shorts. In almost all of these instances when the size is satisfied, the issue will go up a nickel or a dime and then tank as traders rush to exit their longs. On the other hand, there are times when the break out continues for a day or two, but more often than not the stock will slide back down over the course of that time.
From a fundamental perspective, this has not been a broad based rally by any means. It has been the technology sector (I mean AAPL), and as of late the financials have finally joined the party. Several of the S&P 500 Index components have not made new 52 week highs let alone multi-year highs (XOM, GE, JNJ). Even though the financials have rallied, GS, BAC and MS have in no way signaled the dawning of a run-away bull market. Along these lines, the Dow Jones Transportation Index has not even come close to the July 2011 highs.
So what can turn this market south? Of course, an earnings miss from AAPL would get the ball rolling, but that is not even a remote possibility according to Wall Street analysts. According to their estimates, AAPL will not be fully valued until every person in the world (over 12 years of age) has an I-Phone, I-Pad, I-Touch and Apple TV, and any other gadget that I cannot think of that will be invented.
If not AAPL tanking, then how about the financials retreating? Has BAC really improved its earnings and balance sheet to substantiate the doubling of it's stock price? At this time, they have not fully absorbed all the losses from the ill-timed purchase of Countrywide Financial. More importantly, those who find comfort in the recent stress test results should keep in mind that the circumstances that will ignite the next meltdown in the markets, will be unpredictable. Not an event that can be scripted by the Federal Government based on the events from the past. Banks make money by loaning out money and in this current interest rate environment, they would rather buy Treasuries with their cash than assume the risk of making loans.
So let’s put all these hypothetical examples behind us and look at the numbers. With the S&P 500 Index futures 25 points of its recent high, sellers are going to bring their offers down to get out or get short. Thus, 1400 will now become the focus, not 13,000 in the meaningless Dow Jones Average. Expect major resistance at 1400.00 and until there are three closes above 1420.00, 1400 will be a level to remember for the next few months. On the downside, three closes below 1380.00 in the June futures will be confirmation that a top is in for now.
March 28 Mid-Morning Update and KO Tractor-Beam
Apple and Google keep running, and tractor-beam plays in KO and JNJ.
Friday, March 23, 2012
Bats Swings and Misses on IPO
Dennis Dick and Joel Elconin of Premarketinfo.com discuss the BATS IPO today. Chart courtesy of Nanex.net.
Monday, March 19, 2012
S&P 500 Index and Big 10 Weekly Outlook
What a week for Federal Reserve Chairman, Jamie Dimon, I mean Ben Bernanke. With the premature release of the most recent Stress Test results, another leg of this overextended bull market was unleashed. As investors and funds managers identified another sector besides technology, (or should I say AAPL), to park idle funds. As a result, Bank of America (NYSE: BAC) is nearly a double-digit stock once again.
After clearing the former high of the move (1371.50) on Tuesday, the S&P 500 Index never looked back, reaching 1400.50 (yes, another new handle) during Friday’s docile triple witch expiration and peeling back ever so slightly to close at 1398.50. So what is next, dare I say 1425.00, a level that was last visited in January of 2008? And as long as the index stays above 1384.25, there is no reason to put in any protective sell-stops. Warning, whenever I get this bullish, a top is on the horizon.
Well I could not have been more wrong about Exxon-Mobil (NYSE:XOM). After predicting last week a breach of the 84.00 level. XOM turned on a dime Monday, put a double bottom in place and headed north. However, instead of making a new 52 week high (88.13), or even a high for the move for that matter, it stalled just shy of 87.00. In fact, it approached that level in three of the five trading sessions and was rebuffed by High Frequency Traders leaning on the institutional size at 87.00. Perhaps the bull market can drag XOM along, through 87.00 to test the recent high (87.93) and the 52 week high. As long as 84.00 holds, this is the most likely scenario for XOM over the next few weeks.
Nearly another 50 point week for AAPL (NASDAQ:AAPL), so what else is new? After busting out of last Friday’s miniscule four point range on two gap and go’s (Tuesday and Wednesday), 600.00 was on the radar. And it did get there (barely), topping out at 600.01 on Thursday before settling at 585.57. Unfortunately, I have no idea where the top in AAPL will be, although many Wall Street analysts foolishly attempt to predict it. However, I can warn investors about one level to be cognizant of on the downside. 578.00, Friday’s low, which was just under Thursday’s low (578.55) is a place to exit if you cannot stomach a move back down to 550.00.
Now that International Business Machines (NYSE:IBM) has left 200.00 in its tracks, when will it reach 300.00? Well it is no AAPL so that may take awhile. Interestingly, some traders or funds placed a large wager on Friday in this issue. After spiking nearly a point and a half (207.52) over the previous all time high (206.18) during the session, IBM closed .01 off the low of the day at 206.01 on monster volume. Whenever a stock or commodity closes near the high or low of the day, it provides a good trading set-up for a continuation of the existing move or a reversal the following session. Furthermore, IBM’s volume, double the three month average daily volume (4.6 million shares), at 9.6 million shares adds further importance of this level. Of course some of the volume may be attributable to options expiration. I encourage owners of IBM to focus on 206.00 if they are tempted to lock in some profits during next week’s trading.
Chevron Corporation (NYSE:CVX) was finally able to make a new 52 week high (112.38), but was unable to close above the long standing 52 week high of 110.99. The reason for this being, is that once the HFT’s take out a major level, there is never enough volume in this decimal laden world for them to exit their longs at a profit. Thus, they all end up puking out their longs at the same time and CVX spikes down and then floats back up. Looking at the charts since last April every time CVX has made a new 52 week high it has violently sold off. Of course, during those time periods there was an overall heightened volatility in the market. Nevertheless, two fundamental factors seem to be affecting the price of crude oil which has an influence on the price of oil stocks. The first one being, will Israel attempt to take out Iran’s nuclear facilities. Secondly, if and when is Obama going to release any of the United States strategic oil reserves. Since I do not have an answer to either of those questions, long term investors should place their sell stops at 108.00 and let the market take you out of your position.
Microsoft (NASDAQ:MSFT) is doing what it always does. Double or triple top or bottom, slight retreat from it, then consolidation and an upside breakout or breakdown. However, this week MSFT has indicated that the next move may be south. After making a triple top (32.88, 32.94 and 32.95), it has made a triple bottom (32.49, 32.58 and 32.50) during the last three trading sessions as well. More importantly, MSFT settled on Friday (32.60) near the lower end of this range. Therefore, a lower open on Monday could signal an end to MSFT’s current run from just under 25.00.
General Electric (NYSE:GE) made an impressive move last week. Following through on the company's confirmation of earnings projections last week with a vengeance. After trading between 18.50-19.50 for the majority of 2012, GE was able to close above 20.00 for the first time since last April. If this momentum can continue in GE, look for a test of the 52 week high at 20.85 and the February 2011 high of 21.65. Only word of caution for this issue is that the current run of eight consecutive higher highs and higher lows is unsustainable. Perhaps a pullback and consolidation around 20.00 will occur this week. A string of closes under 20.00 may indicate a bigger pullback will be forthcoming.
Quiet week for Procter and Gamble (NYSE:PG). After Monday’s .78 gain, PG has run into some major institutional size at 68.00. And the HFT’s guys are loving it. Stepping out and shorting PG in the high 67’s was a consistent money maker for the remainder of the week. With PG succumbing to the selling pressure on Friday and testing the quadruple top area that it broke out from on Monday, expect a 67.00-68.00trading range until the size at 68.00 is satisfied or the buyers at 67.00 disappear.
Johnson&Johnson (NYSE:JNJ) has offered up a similar scenario to PG. Institutional size at 65.50 has capped every attempted rally in JNJ for the entire month. There is simply no driver for this issue until the next earnings announcement on April 12th. Since going ex-dividend last month JNJ has been able to recoup that dividend ground, but that is it. Also, this issue has been ignored by Wall Street analysts for some time. With the only significant news being the announcement of a new CEO and Warren Buffet’s exit from this issue, expect more of the same this week, with 65.50 acting as major resistance and 64.80 as major support.
AT&T (NYSE:T) is looking toppy. Three consecutive highs between 31.65-31.80 have kept a lid on the rally from 30.00. Of course, the 52 week high of 31.94 and the institutional size at 32.00 has provided the HFT traders with another issue to feast on. Therefore, the tug of war will continue until the size at 32.00 is taken out, or the major support at 31.35 is breached. Perhaps the announcement of the I-Phone 5deployment will be enough to keep the positive momentum going.
Once again, Pfizer (NYSE:PFE) is flirting with 22.00. After closing at 22.01 on Tuesday, PFE was not able to post another close above 22.00 for the rest of the week. With 22.10 acting as a double top and 22.17 being a four year high, this area is going to be difficult to penetrate. Without the positive announcement of a new drug trial or a hike in the dividend, there is no driver for this issue. Nevertheless, a string of closes above 22.00 may be enough pressure to induce a rally in this heavily shorted issue. The longer the consolidation at 22.00 persists with no break-out to the upside, the more likely PFE with drift down to the major support at 21.00.
In closing, there appears to be no end to this bull market. With positive news on the financials, there is an entire new sector for traders and fund managers to focus on. Keep in mind, many of these issues (GS, MS, JPM, BAC, and WFC) have a ways to go, in order to reach their 2008 levels. Unless an I-Pad blows up in someone’s face and kills them, there is no reason to be short this market. But just to be on the safe side, focus on a close below 1384.00 (June futures) to indicate a change in this rosy scenario.
Disclaimer:
All of the information, material, and/or content contained in this analysis including any numbers provided in this analysis are for informational purposes only. Premarketinfo.com and it's owners are NOT registered investment advisors, and cannot make buy or sell recommendations. Please consult your own independent financial advisor before making any investment decisions. We will not be held liable for any direct, indirect, or consequential damages arising out of the use of any information provided in our security analysis.
After clearing the former high of the move (1371.50) on Tuesday, the S&P 500 Index never looked back, reaching 1400.50 (yes, another new handle) during Friday’s docile triple witch expiration and peeling back ever so slightly to close at 1398.50. So what is next, dare I say 1425.00, a level that was last visited in January of 2008? And as long as the index stays above 1384.25, there is no reason to put in any protective sell-stops. Warning, whenever I get this bullish, a top is on the horizon.
Well I could not have been more wrong about Exxon-Mobil (NYSE:XOM). After predicting last week a breach of the 84.00 level. XOM turned on a dime Monday, put a double bottom in place and headed north. However, instead of making a new 52 week high (88.13), or even a high for the move for that matter, it stalled just shy of 87.00. In fact, it approached that level in three of the five trading sessions and was rebuffed by High Frequency Traders leaning on the institutional size at 87.00. Perhaps the bull market can drag XOM along, through 87.00 to test the recent high (87.93) and the 52 week high. As long as 84.00 holds, this is the most likely scenario for XOM over the next few weeks.
Nearly another 50 point week for AAPL (NASDAQ:AAPL), so what else is new? After busting out of last Friday’s miniscule four point range on two gap and go’s (Tuesday and Wednesday), 600.00 was on the radar. And it did get there (barely), topping out at 600.01 on Thursday before settling at 585.57. Unfortunately, I have no idea where the top in AAPL will be, although many Wall Street analysts foolishly attempt to predict it. However, I can warn investors about one level to be cognizant of on the downside. 578.00, Friday’s low, which was just under Thursday’s low (578.55) is a place to exit if you cannot stomach a move back down to 550.00.
Now that International Business Machines (NYSE:IBM) has left 200.00 in its tracks, when will it reach 300.00? Well it is no AAPL so that may take awhile. Interestingly, some traders or funds placed a large wager on Friday in this issue. After spiking nearly a point and a half (207.52) over the previous all time high (206.18) during the session, IBM closed .01 off the low of the day at 206.01 on monster volume. Whenever a stock or commodity closes near the high or low of the day, it provides a good trading set-up for a continuation of the existing move or a reversal the following session. Furthermore, IBM’s volume, double the three month average daily volume (4.6 million shares), at 9.6 million shares adds further importance of this level. Of course some of the volume may be attributable to options expiration. I encourage owners of IBM to focus on 206.00 if they are tempted to lock in some profits during next week’s trading.
Chevron Corporation (NYSE:CVX) was finally able to make a new 52 week high (112.38), but was unable to close above the long standing 52 week high of 110.99. The reason for this being, is that once the HFT’s take out a major level, there is never enough volume in this decimal laden world for them to exit their longs at a profit. Thus, they all end up puking out their longs at the same time and CVX spikes down and then floats back up. Looking at the charts since last April every time CVX has made a new 52 week high it has violently sold off. Of course, during those time periods there was an overall heightened volatility in the market. Nevertheless, two fundamental factors seem to be affecting the price of crude oil which has an influence on the price of oil stocks. The first one being, will Israel attempt to take out Iran’s nuclear facilities. Secondly, if and when is Obama going to release any of the United States strategic oil reserves. Since I do not have an answer to either of those questions, long term investors should place their sell stops at 108.00 and let the market take you out of your position.
Microsoft (NASDAQ:MSFT) is doing what it always does. Double or triple top or bottom, slight retreat from it, then consolidation and an upside breakout or breakdown. However, this week MSFT has indicated that the next move may be south. After making a triple top (32.88, 32.94 and 32.95), it has made a triple bottom (32.49, 32.58 and 32.50) during the last three trading sessions as well. More importantly, MSFT settled on Friday (32.60) near the lower end of this range. Therefore, a lower open on Monday could signal an end to MSFT’s current run from just under 25.00.
General Electric (NYSE:GE) made an impressive move last week. Following through on the company's confirmation of earnings projections last week with a vengeance. After trading between 18.50-19.50 for the majority of 2012, GE was able to close above 20.00 for the first time since last April. If this momentum can continue in GE, look for a test of the 52 week high at 20.85 and the February 2011 high of 21.65. Only word of caution for this issue is that the current run of eight consecutive higher highs and higher lows is unsustainable. Perhaps a pullback and consolidation around 20.00 will occur this week. A string of closes under 20.00 may indicate a bigger pullback will be forthcoming.
Quiet week for Procter and Gamble (NYSE:PG). After Monday’s .78 gain, PG has run into some major institutional size at 68.00. And the HFT’s guys are loving it. Stepping out and shorting PG in the high 67’s was a consistent money maker for the remainder of the week. With PG succumbing to the selling pressure on Friday and testing the quadruple top area that it broke out from on Monday, expect a 67.00-68.00trading range until the size at 68.00 is satisfied or the buyers at 67.00 disappear.
Johnson&Johnson (NYSE:JNJ) has offered up a similar scenario to PG. Institutional size at 65.50 has capped every attempted rally in JNJ for the entire month. There is simply no driver for this issue until the next earnings announcement on April 12th. Since going ex-dividend last month JNJ has been able to recoup that dividend ground, but that is it. Also, this issue has been ignored by Wall Street analysts for some time. With the only significant news being the announcement of a new CEO and Warren Buffet’s exit from this issue, expect more of the same this week, with 65.50 acting as major resistance and 64.80 as major support.
AT&T (NYSE:T) is looking toppy. Three consecutive highs between 31.65-31.80 have kept a lid on the rally from 30.00. Of course, the 52 week high of 31.94 and the institutional size at 32.00 has provided the HFT traders with another issue to feast on. Therefore, the tug of war will continue until the size at 32.00 is taken out, or the major support at 31.35 is breached. Perhaps the announcement of the I-Phone 5deployment will be enough to keep the positive momentum going.
Once again, Pfizer (NYSE:PFE) is flirting with 22.00. After closing at 22.01 on Tuesday, PFE was not able to post another close above 22.00 for the rest of the week. With 22.10 acting as a double top and 22.17 being a four year high, this area is going to be difficult to penetrate. Without the positive announcement of a new drug trial or a hike in the dividend, there is no driver for this issue. Nevertheless, a string of closes above 22.00 may be enough pressure to induce a rally in this heavily shorted issue. The longer the consolidation at 22.00 persists with no break-out to the upside, the more likely PFE with drift down to the major support at 21.00.
In closing, there appears to be no end to this bull market. With positive news on the financials, there is an entire new sector for traders and fund managers to focus on. Keep in mind, many of these issues (GS, MS, JPM, BAC, and WFC) have a ways to go, in order to reach their 2008 levels. Unless an I-Pad blows up in someone’s face and kills them, there is no reason to be short this market. But just to be on the safe side, focus on a close below 1384.00 (June futures) to indicate a change in this rosy scenario.
Disclaimer:
All of the information, material, and/or content contained in this analysis including any numbers provided in this analysis are for informational purposes only. Premarketinfo.com and it's owners are NOT registered investment advisors, and cannot make buy or sell recommendations. Please consult your own independent financial advisor before making any investment decisions. We will not be held liable for any direct, indirect, or consequential damages arising out of the use of any information provided in our security analysis.
Monday, March 5, 2012
17,000 SHARE TRADE ROCKS AAPL-ARE YOU KIDDING ME?
CNBC has reported a 17,000 share block trade sent AAPL tumbling over 10 points this morning. First of all, good thing it was not 34,000 or 51,000 shares or AAPL would be under 500. Secondly, who in their right mind would actually show an order of that size to the street? The dark pool and HFT traders must have thought they died and went to heaven. In other words, that trader would have been so much better off placing 17 x 1000 share orders to get off his or her execution. If he or she would have enetered the order in that fashion, most likely they would been filled within a few points. At what price do you think a majority of that order was executed at, you guessed it, 526.00. What is the moral of this story? If you as a fund or an individual have a sizeable AAPL position, you better have an good exit plan. More importantly, use today's price activity as an example of what NOT to do.
Friday, March 2, 2012
BREAK OUT OR FAKE OUT IN GOLDMAN SACHS?
A six point up move in GS (Goldman Sachs) yesterday, found very little media coverage. However, this quiet rally in GS was very significant from a technical perspective. This issue, finally cleared the major resistance at 118.66 with a vengeance, and traded as high as 121.24 before settling at 121.13. What is next for this highly volatile stock?
First of all, this move occurred after earlier in the week GS reported in a regulatory filing that they may be charged with civil violations, for disclosure issues in the mortgage backed securities markets. From my experience, when a stock fails to break down after negative news hits the tape, it means it is going up. Most likely, whatever fines they may receive will be a drop in the bucket compared to their overall revenue.
Secondly, GS had a quiet February of consolidation (trading the entire month in a 7 point range) after it's strong January rally from the 90 dollar area. Perhaps now that it has cleared 118.66, the stage is set for a test of the July high of 139.25. A string of closes above 118.66 would bolster the chances of this scenario coming to fruition.
Also, the positive earnings report from last quarter and upward guidance are hard to ignore. The tenor of their conference call was that the company had navigated through a volatile 2011 and has positioned themselves well for 2012. As always, one positive earnings report does not make a trend, but I am sure the company is capitalizing on the last leg up in the markets.
So how do you try and capitalize on the next move in GS? You could buy the 140 calls or any other out of the money options, but you may watch your premium erode as the stock zig-zags it's way up to your strike price the day after the options expire. You could place a bid at the level it broke out from, 118.66 and pray for a pullback with a stop at 108.66, to employ a 2 to 1 risk-reward (138.66 target). Or you could simply buy the issue now (120.50) with a stop at 118.00. That way, if the break out becomes a fake out a least your losses will be limited.
In closing, GS has paid back Warren Buffet, steered its way through a treacherous 2011 and is well positioned to participate in the Facebook IPO (which I think is going to be a gangbuster). So until the tape tells a different story, figure out a way to participate in the potential rally in Goldman Sachs.
Disclaimer:
All of the information, material, and/or content contained in this analysis including any numbers provided in this analysis are for informational purposes only. Premarketinfo.com and it's owners are NOT registered investment advisors, and cannot make buy or sell recommendations. Please consult your own independent financial advisor before making any investment decisions. We will not be held liable for any direct, indirect, or consequential damages arising out of the use of any information provided in our security analysis.
First of all, this move occurred after earlier in the week GS reported in a regulatory filing that they may be charged with civil violations, for disclosure issues in the mortgage backed securities markets. From my experience, when a stock fails to break down after negative news hits the tape, it means it is going up. Most likely, whatever fines they may receive will be a drop in the bucket compared to their overall revenue.
Secondly, GS had a quiet February of consolidation (trading the entire month in a 7 point range) after it's strong January rally from the 90 dollar area. Perhaps now that it has cleared 118.66, the stage is set for a test of the July high of 139.25. A string of closes above 118.66 would bolster the chances of this scenario coming to fruition.
Also, the positive earnings report from last quarter and upward guidance are hard to ignore. The tenor of their conference call was that the company had navigated through a volatile 2011 and has positioned themselves well for 2012. As always, one positive earnings report does not make a trend, but I am sure the company is capitalizing on the last leg up in the markets.
So how do you try and capitalize on the next move in GS? You could buy the 140 calls or any other out of the money options, but you may watch your premium erode as the stock zig-zags it's way up to your strike price the day after the options expire. You could place a bid at the level it broke out from, 118.66 and pray for a pullback with a stop at 108.66, to employ a 2 to 1 risk-reward (138.66 target). Or you could simply buy the issue now (120.50) with a stop at 118.00. That way, if the break out becomes a fake out a least your losses will be limited.
In closing, GS has paid back Warren Buffet, steered its way through a treacherous 2011 and is well positioned to participate in the Facebook IPO (which I think is going to be a gangbuster). So until the tape tells a different story, figure out a way to participate in the potential rally in Goldman Sachs.
Disclaimer:
All of the information, material, and/or content contained in this analysis including any numbers provided in this analysis are for informational purposes only. Premarketinfo.com and it's owners are NOT registered investment advisors, and cannot make buy or sell recommendations. Please consult your own independent financial advisor before making any investment decisions. We will not be held liable for any direct, indirect, or consequential damages arising out of the use of any information provided in our security analysis.
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