Wall Street Buddha

Goldman Sachs, go long or sell short? April 18, 2010

Friday morning I wake up to the news that Goldman is being charged with fraud.  Immediately the stock plunges 13%.  First thing that comes to mind is how am I going to make money.  The market has been on fire! We are due for a correction in the indexes and Goldman seems to be a perfect catalyst for such action. After reviewing the chart on Goldman, support and resistance becomes more obvious as to how I should play this.

A prior wedge (yellow) seems to be an important price level at $160. That’s where the last breakout occured, all the action above are speculators, i.e. short term traders. Many funds and including Warren Buffet are still holding large positions above this level.  Volume suggests all the selling was done in one day. at least by the short term traders.

The critical price NOW is $160. I trade above or below this price. Because it is above I have taken a very small long position. However, if it breaks below, I will initiate a short play. My decisions are not dictated by my opinions. The market will point me in the right direction.

Normally, after such a drastic move like this, I am usually patient and wait for some type off patterns to form. But, hey, I’m emotional like everyone else. To get it off my chest, I play.  Very small.