Articles continue to pop up addressing the public anger over the business practices of Goldman Sachs (NYSE:GS). Greg Smith, former employee, wrote a scathing opinion piece in the New York Times (NYSE:NYT) last week and is looking to write a book on his experience at the firm ... which, to say the least, will not paint Goldman in good light. The negative publicity has not affected the share performance of Goldman Sachs stock, though, which is having a fantastic rise so far this year. In fact, many big name financial stocks that no one could say anything good about a few months back are all rallying aggressively. Four of the biggest names in banking are currently top performers in the financial sector, despite the negative publicity. The question now is, can Goldman Sachs, Citigroup (NYSE:C), J.P. Morgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) keep it up?
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Goldman Sachs has been flying higher this year, and so far very little has been able to slow it down. Recently putting a new intraday high for 2012 at $128.72, the stock is up roughly 39% YTD. The short-term trend is higher, with the trendline that began in December intersecting just below $123. A move below that, or the 50-day moving average slightly lower at $116.49, indicates a larger decline. Significant support is from $117.8 to $111.40, which should hold up deeper pullbacks (if not, that is very bearish) and provide a buying opportunity if it does. There is resistance overhead from $130 to $140, which was a choppy trading range during summer last year. Ability to move into this area is a positive signal for the longer-term, while inability to make further progress at these levels means profit taking is likely in order. There is a negative divergence on the MACD currently. Divergence is a poor timing indicator, so it is not a 'sell' signal, but many traders do use it as a sign of caution.
SEE: Divergence: The Trade Most Profitable
J.P. Morgan Chase has also been a great performer YTD, up about 39%. The trend accelerated in March and recently put in a new 2012 high on Tuesday of $46.49. A trendline can be drawn from the November low to under the March low, which shows this stock is still in an uptrend until it crosses back below $42. Stops can be placed below that trendline. The 2011 high at $48.36 is not far away, and given the close proximity to current levels it is likely the next target. It should be noted that since 2002, the $50 mark has been very strong resistance. While it has been briefly penetrated for short periods of time, the price has not been sustainable. Currently the MACD is rising along with price confirming the move higher.
SEE: A Primer On The MACD
Citigroup is up approximately 40% YTD. Two trendlines can be drawn, one starting from the low in October and the next from the low in December. The shorter-term trendline can be used for trade signals and stops, which currently intersects just below $35. A drop below that trendline warns of a larger correction into the $30 area, which is primary support and also very close to where the slightly longer-term trendline intersects. The MACD has been flattening out as the price rise. This is not a 'sell' signal but a sign of caution at current levels with resistance close by at $40; $40 is the next likely upside target if the recent intraday high at $38.40 is eclipsed.
Bank of America has been the star performer, up over 70% YTD. Having paused near $8 last month it made a quick surge to $10 this month and is pausing again. A break above $10 (preferably a closing price) signals another advance with targets at $10.50 and $11. The trendline higher currently intersects just below $9, major support is between $8.35 and $7.66. This support region should hold pullbacks, and is a potential buying opportunity with stops below the low of that support area. Movement below that support area is bearish.
SEE: Support & Resistance Basics
The Bottom Line
Despite banks and the financial being under fire, with Goldman Sachs most recently taking the spotlight, these major institutions have been surging ahead this year. All remain in strong short-term uptrends with potential for further upside. Risk can be managed by using the trendlines or major support levels, which also present buying opportunities if the levels hold on pullbacks.
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At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.
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