Why Does JC Parets Not Like Goldman Sachs?

JC Parets, market technician and founder of Eagle Bay Capital, keeps track of the stock in the Dow 30, analyzing the companies every week.

In its most recent Dow 30 report, the firm provides some thoughts on Goldman Sachs Group Inc (NYSE: GS).

Weekly Chart

Structurally, Goldman is still in a nice uptrend. However, it is very close to the key resistance from the 2009 highs. Momentum is trying hard to break this downtrend line and getting closer. However, bulls have not seen a favorable risk/reward profile for a while, since the 200-week moving average is pretty flat and relative strength has experienced a two-year downtrend.

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Taking this into account, Eagle Bay only wants to be long if prices surpass all this overhead supply from the 2009 highs.

"I would argue that a sustained breakout above the 2009 highs would be very bullish and would give us a target of 250 based on the 2007 highs," Parets commented.

Daily Chart

Short term, Eagle Bay has only wanted to be long Goldman above last January's highs (shaded in gray in the chart above). Based on the weekly timeframe, the firm sees (and has seen, over the past couple of months) limited upside. This is why they incorporate multiple timeframes.

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"I haven't liked this very much after breaking the uptrend line and former resistance from last January, especially with momentum now in a bearish range hitting oversold conditions on this sell-off," Parets explained.

"This is not for me and remain neutral as we failed at resistance from this broken uptrend line from the spring and 161.8 percent Fibonacci extension of the Spring 2014 correction," he concluded.

Image Credit: Public Domain