2015 has been a rather disappointing year for Goldman Sachs’ (GS) shareholders. The stock climbed to 218.70 in June as if the sky was the limit. However, the bulls ran out of power, which led to a sell-off to 167.45 in September. Now, in the beginning of 2016, it seems that investors are still wondering what to do. Fundamental analysts’ main cause for bullishness is the FED’s intention to continue raising the interest rates throughout the year. Does this mean now is the time to buy Goldman Sachs stock? Let’s apply the Elliott Wave Principle to the daily chart of the stock and try to put things into perspective.
According to the theory, five-wave impulses indicate the direction of the trend. If the impulse is pointing up, long positions are preferable. If it points down – the trend is bearish. So, what is the direction of Goldman Sachs’ trend? As visible on the chart above, the decline from 218.70 and 167.45 has a clear five-wave structure. But before the bears return there should be a three-wave recovery. In our opinion, there appears to be an A-B-C zig-zag correction with wave C still unfolding. If this is true, Goldman Sachs stock might climb above 200.00. Then the 5-3 wave cycle would end and give the start of a new price drop. In other words, as long as the invalidation level of 218.70 holds, levels lower than 167.00 remain likely.
