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Goldman Sachs and Other Big Banks Break Down

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Shares of The Goldman Sachs Group, Inc. (GS) fell more than 3% on Tuesday, following in the footsteps of Morgan Stanley (MS), Bank of America Corporation (BAC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC), which all moved lower. The downtick was sparked by comments made by Morgan Stanley executives at a New York conference stating that transaction revenue slowed in March and remained lower in April and May.

There are also growing geopolitical risks that could affect the wider banking sector and global economy. The Trump administration announced that it would move forward with its threat to impose tariffs on Chinese imports, which renewed fears of a trade war over the coming quarters. At the same time, political drama in Italy and Spain has renewed concerns of a large Eurozone economy deciding to leave the European Union. (See also: US Stocks May Stage Rebound Amid Warnings Signs.)

Technical chart showing the performance of The Goldman Sachs Group, Inc. (GS) stock

From a technical standpoint, Goldman Sachs stock broke down from prior reaction lows to S1 support levels at $228.92. The 50-day moving average also crossed below the 200-day moving average. The relative strength index (RSI) appears oversold with a 31.27 reading, but the moving average convergence divergence (MACD) experienced a bearish crossover. These indicators suggest that the stock could see some support, but the long-term trend remains decidedly bearish.

[Check out Chapter 4 of the Technical Analysis course on the Investopedia Academy to learn more about supplemental technical indicators like the RSI and the MACD]

Traders should watch for a breakdown from S1 support to S2 support at $220.34 after a period of consolidation. If the stock rebounds from these levels, traders could see a move to upper trendline resistance at $235.00. A breakout from those levels could lead to a retest of pivot point, 50-day and 200-day moving average resistance levels at around $245.00, although a move higher from those levels appears less likely. (For additional reading, check out: Why Big Bank Stocks Are About to Crumble.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

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May 30, 2018

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