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Wednesday, December 21, 2011

some thoughts... GS, SU

GS - If we are to assume for the next two weeks, with the ECB bank liquidity in place, the world will not see an EU country involuntary default, the banks do not look so bad here. (At least for a technical trade.)

GS is testing its low-end support.  The daily indicates a three month bottoming process, where the high 80 level is acting as support.  If a bottoming is taking place, then there is a high probability a move to 100 will happen. Especially if the market takes a positive spin in the next two weeks.

Support for a GS-trade-to-100 being a higher probability move is below...

1. The longer-term trend showcases GS is still in a negative trend.

A move to 100 is likely as it is the top-end resistance for the negative trend.  However, if the banks are really in a bottoming process, the top-end resistance should be breached this go-around, with a positive market. A breach should allow GS to see 105-110.

2. Consensus for Book Value, without an EU country default, is 135 (as per Yahoo Finance :). If we assume a +30% decline, book value is around 105.

So trade to 100 seems very very possible. (I would have a tight stop, and close out of the trade at 89. But, technically, the real stop for this trade should be in the low 87s. Assuming one can tolerate a 5 point loss for an 8point gain.)

SU - SU is trading too low with respect to its production and price of oil. Technically, there looks to be a solid probability that SU approaches between 30-32. (Although with their production capacity and oil near 100, SU should really be trading in the mid/high 30s.)

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