Chart of the Day – $GS: Trading Places

by CC September 29, 2015 3:25 pm • Chart of the Day• Commentary

Earlier today we highlighted some large short dated put activity in JPM (Name That Trade – $JPM: Bank Shot), which also drew our attention to what is now a new 52 week low in shares of Goldman Sachs (GS).  What struck us about the JPM put buying was that a trader was either looking for protection back towards the 52 week lows (well below current levels) or making a play for new lows.

GS, also considered a best of breed, is down 12% on the year, and down 22% from its post financial crisis highs made in late June. Today’s break below its August 24th low is not only significant because it demonstrates weak relative strength to the broad market and its peers, but also because $172 has proven to be important psychological support over the last year: 

[caption id="attachment_57244" align="aligncenter" width="600"]GS 1yr chart from Bloomberg GS 1yr chart from Bloomberg[/caption]

What’s clear from the five year chart is that the stock has (just this past month) broken the uptrend that has been in place from the 2011 lows during the depths of the European Sovereign Debt crisis:

[caption id="attachment_57242" align="aligncenter" width="600"]GS 5 year chart from Bloomberg GS 5 year chart from Bloomberg[/caption]

GS reports Q3 results prior to the open on Oct 15th, the options market is implying about a 4% one day move, which is well high of the 4 qtr average of about 1.5% and the long term average of only 3%.

Since the volatility in global markets in August there has been lots of chatter about which bank’s trading desks were prepared for the first real bout of volatility in our markets in years, and which were using the same old playbook. I suspect the relative under-performance in GS of late has to do with perception, but if crisis trading history has shown us anything, it’s been foolish to bet against GS.  But the technical damage is nasty and will be interesting to keep a close eye on as we get closer to earnings in mid October.