Goldman Sachs Earnings Preview: Where to Buy the Dip

Goldman Sachs has been one of the best-performing bank stocks over the past three months. Here's what the stock charts say with earnings on deck.
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The bank stocks have been thrust into the spotlight this week, with earnings season starting up. Goldman Sachs  (GS) - Get Report will soon find itself under the microscope, with earnings due up on Wednesday before the stock market opens.

Goldman Sachs isn’t the first bank to report, though. JPMorgan Chase  (JPM) - Get Report, Citigroup  (C) - Get Report and Wells Fargo  (WFC) - Get Report all reported on Tuesday morning.

Further, Goldman won’t have to go at it alone, either. It reports with PNC Financial  (PNC) - Get Report and U.S. Bancorp  (USB) - Get Report.

Thus far, the reaction hasn’t been great from the companies that have reported. JPMorgan is about flat on the day, while Citigroup and Wells Fargo were both lower.

Working in Goldman Sachs’ favor though is the chart. Shares have traded better than many of peers - and it hasn’t gone unnoticed.

Over the last three months, Goldman Sachs stock is up 18%, lagging only Morgan Stanley  (MS) - Get Report over the same measure. Goldman’s performance is almost 10 percentage points higher than the next best performer, which is Citigroup.

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Trading Goldman Sachs

Daily chart of Goldman Sachs stock.

Daily chart of Goldman Sachs stock.

The chart above highlights this recent strength. Look how Goldman Sachs stock has continued to make a series of lower highs, as uptrend support guides the share price higher (blue line).

On Friday, shares ripped hard off the 50-day moving average, while reclaiming the 20-day and 200-day moving averages in the process.

On Monday shares gapped up and held the gains relatively well, while Tuesday’s action — rallying in the face of lackluster price action from its sector — shows that bulls have confidence.

Now things get a little trickier.

Once the company reports, investors either need to see upside follow-through or a pullback into support.

If Goldman Sachs stock continues higher, let’s see if it can clear the two-day high currently at $212.98. That opens up the June high near $223 as a potential upside target, a level that also comes into play near the 78.6% retracement.

On the downside, I would love a dip into the $196 to $203 area. There Goldman Sachs stock will find numerous moving averages as potential support, as well as trend support. Below $195 puts $185 and the 50% retracement near $188 in play.