Will The Goldman Sachs Group, Inc. (GS) Sell Off Like the Rest of the Banks?

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The Goldman Sachs Group, Inc. (GS) is a New York City based investment banking and financial management institution. At the time of this post (11:50AM CST), GS is currently trading at 178.55, down 0.93% on the day. The stock is currently within the middle portion of its 52 week trading range of 151.65-198.06, and has been in a relatively steady decline since the end of 2014 after failing a potential double top test over 195.00 on the daily chart. GS is set to report earnings tomorrow, 1/16/2015 before the opening bell.

Over the last eight quarters of earnings data available GS has traded mostly bearishly, moving lower on five out of eight sessions immediately following the EPS release. The average historical move during this time period was 2.0%. Currently the options market is pricing in approximately a 3.06% move in the stock by this Friday’s monthly options expiration, an implied move that would represent about a 5.50 change in the price of the stock. GS is currently trading well below the Ichimoku Cloud and all relevant moving averages on the daily chart, and has continued to fall alongside other big banks like WFC and JPM over the course of the last several weeks. This overall weakness in financials following earnings, coupled with Goldman Sachs’ recent tendency to trade lower after earnings has me leaning bearish this name, and I will be looking to establish a short position going into today’s close.

Potential Trade: Buying the GS Jan 177.5-175 Put Spreads for $0.60
Risk: $60 per 1 lot
Reward: $190 per 1 lot
Breakeven: $176.90

Andrew Keene

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