Here Are The Technical Reasons Why Goldman Sachs Keeps Dropping

From Corey Rosenbloom: Stocks that are high-flyers run the risk of crashing back to earth. Goldman Sachs (GS) – a supremely strong stock – plunged $15 from the new highs and is on an expected – if not overdue – sell pathway lower.

Let’s pinpoint the chart pattern and note the key levels in play right now for GS:

After the November Election, financials stocks surged to the front of the market in terms of relative strength.

Money flowed into the financial sector and Goldman Sachs (GS) benefited strongly from this money flow.

Shares surged from $175 to peak under $250 here in January.

However, a lengthy sideways pattern and negative divergences in December set the stage for the January fall.

The breakdown under the support of the rising 20 day EMA ($240) sets the stage for a fall toward the rising 50 day EMA into $225.

Here’s the pattern and development of the divergences and current plunge from the highs:

A “Bearish Rising Wedge” price pattern – along with negative momentum and volume divergences – set the stage for a likely tumble from the highs.

While price remained pinned at the highs longer than expected, gravity (selling pressure) eventually caught up with the bulls as a liquidation (selling) phase overpowered buyers.

Again, focus on the Daily Chart for lower targets as this event continues.

The Goldman Sachs Group Inc (NYSE:GS) rose $0.01 (0%) in premarket trading Thursday. Year-to-date, GS has declined -2.19%, versus a 1.40% rise in the benchmark S&P 500 index during the same period.

ETF investors should keep an eye on the iShares Dow Jones US Broker-Dealers Index Fund (IAI) amid GS’s downturn. IAI has by far the largest exposure to GS within its holdings among all ETFs, with a whopping 11% of its portfolio dedicated to GS.

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