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Will Goldman Sachs fall to $100? Chart Analysis-Part 1, Day 1

|Includes: Goldman Sachs Group Inc. (GS)

Will Goldman Sachs fall to $100? Chart Analysis-Part 1, Day 1

Goldman Sachs has just been charged with some pretty serious fraud charges and this leaves everyone with a lot of unanswered questions. Will they lose their customers?  Will their profitablity become severely impacted?  Will the rest of Wall Street refuse to do business with them? Will they go the way of Lehman Brothers and Bear Stearns?  Only time will answer these questions but what specifically everyone wants to know is where the stock price will go next.  We hope to answer that question here.

First of all it is probably pretty safe to assume that Goldman will not see it's old highs anytime soon. If it does that would be a 20% move.  Most likely a long  drawn out ugly court case with the intent of character assasination on the Goldman Sachs brand will not allow this to happen any time soon. 

Let’s take a look at the chart of GS to see what it tells us about the potential downside

Day 1 saw GS close down 12.79% after being off as much as 15.5% earlier in the day. Once the news broke GS immediately tanked but bounced briefly at the 50,100 and 200 day Moving Averages. These critical technical levels were shortly thereafter broken. This is extremely negative since it tells us how aggressive the selling is and how weak the few bidders were.  Taking a look on the 5 minute chart we see these technical levels next turned into resistance. What this shows us is the shorters and sellers in general had a firm grip on this stock as the old support zones had now turned into the resistance. This has now become the level where a wall of sell orders and new shorts will be placed going forward.

If GS can break back above the $165-$167 levels then there may be hope for this stock but as for now we expect much lower prices.  GS would have to retake these old support levels in the first couple of trading days after breaking them or the odds of it happening go way down 

The next level of support is around 10% lower at the $145 level. If this doesn’t hold we  realistically could see the $100 level again.

With any big news story like this you will hear strong opinions on both sides. The only thing we are interested in is where the stock goes next. Sifting through all the opinions and PR can be tough but the chart can’t lie. It shows us exactly where odds favor the stock price going next.  It is hard to know exactly how much damage is done to Goldman’s credibility but the true sentiment will be spelled out on the chart.

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Disclosure: no positions