Goldman Sachs Is Running Out of Steam

Goldman Sachs' (GS) weak action over the last three trading sessions may signal a turning point.

The powerful rally off the September low drove the stock into the teeth of a very heavy resistance area near the January peak. With upside momentum easing, Goldman Sachs investors should anticipate a pullback in the near term.

In late September, Goldman Sachs bottomed near its 200-day moving average. As October began, the stock was in full rally mode and, with the help of a strong third-quarter earnings report, shares were heading for new rally highs. After a bit of chop immediately following Goldman's Oct. 18 news, the stock surged past the January peak and into fresh 2016 high territory.

This impressive move appeared to be headed for another leg higher after November began with a gap higher open that lifted the stock past the October peak.

Unfortunately for the bulls, Goldman Sachs stock has faltered since and may be headed for a deep pullback. The break of the stock's five-week bull channel, which guided the stock over 13% higher, is a clear warning sign.

As this week's pullback develops further, investors should focus on the $172.50 to $171.30 area. This key support zone includes the stock's September high near the upper band and the 40-week moving average near the lower band.  A hold in this zone would offer a low-risk entry opportunity for patient bulls. 

If the $171.00 level is clearly taken out, a more prolonged bottoming pattern is ahead.

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