Monday, May 18, 2009

I like GS better than BAC

(Update 2:28pm PST) According to Bloomberg, Goldman Sachs, Morgan Stanley and JP Morgan Chase applied to repay the TARP money.
GS was up 6.5% for the day, MS up 8.2%, JPM up 6.7%. XLF was up 6.5%.

Goldman Sachs (GS) upgraded Bank of America (BAC) from nutral to buy, and put the stock on their "Conviction Buy" list today.

BAC has been on my "Shoulda, Coulda Stock" list, but actually I like GS better. Much better. It is probably too late to buy, and if it is not too late the easy trade is probably over. This is one of the stocks which traders have kept saying will collapse at any moment ever since it hit the low in November 08 and started climbing up.

This is a weekly chart of GS, to get the daily noise out. From December 08 to mid March 09, the stock spent time going up and down the ascending channel, which many people called a bearish wedge (which will normally break to the existing trend: down). Then it broke out of the wedge to the UPSIDE (this was probably a safer point of entry with stop at the trend line), and since then the upper trend line hasn't been breached. Ahh nice hindsight. Always 20/20.

Not only that, the stock is approaching the trend line (around $140) that connects March 08 low, September 08 gap, and May 09 high. On the weekly chart, the shape from September 08 to present could be a cup - a handle may form.

The only thing I don't like is the volume, which hasn't picked up much on the ascent. On the bigger picture level, it is hard to buy and hold any financial stock for the fundamental reasons. But technically, it is what it is: looking good.

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