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Should You Buy Goldman Sachs on Archegos Capital News?

Strange selling pressure seen Friday and again Monday is due to a forced liquidation by Archegos Capital after the hedge fund defaulted on margin calls. Let's see look at the chart for Goldman Sachs.

Goldman Sachs  (GS) , Morgan Stanley  (MS) , Nomura  (NMR)  and other banks were in the headlines on Monday and all traded lower during the session.

On Friday, we saw some strange price action and some dangerous selloffs in certain stocks before a late-day surge in the indices and a recovery in some of these names.

Only later did we find out that the strange selling pressure was due to forced liquidation after U.S.-based hedge fund Archegos Capital defaulted on margin calls.

Although Goldman Sachs reportedly said any losses it faces due to Archegos Capital will be immaterial, the stock was still down on the news.

Now traders want to know if this is a buying opportunity. Let’s look at the charts.

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Trading Goldman Sachs

Daily chart of Goldman Sachs.

Daily chart of Goldman Sachs.

Shares of Goldman Sachs opened right on the 10-week moving average and just above the 50-day.

The bank has been on a powerful run and hasn’t tested these marks in months. The closest that it came was back in late January, before bulls enjoyed another powerful move to new highs.

Support is also coming into play near the prior March low, near $316.50.

Not to get too tied up on the short-term setup, but traders will also notice that despite the bounce from Monday’s low, Goldman Sachs stock is struggling with the low from the prior two days.

If shares can’t close over the $325 area, Monday’s low remains vulnerable.

Should the stock take out Monday’s low, a test of the 50-day moving average is possible, as is a test of the $306 to $309 area. This was a key breakout zone and it wouldn’t be the worst thing in the world to see Goldman Sachs test down into this zone and fill the gap toward $306.

However, that only remains the case if support comes into play in this zone. If it doesn’t, then sub-$300 may be in play until shares test down into the 21-week moving average.

On the upside, bulls need to see shares clear the 10-day and 21-day moving averages, which have been resistance over the past week or so. Once those are cleared, then the stock has the potential to make another push back toward $350.