Once again, not yet at the original target of $160 but sufficiently high to sell for an almost 300% gain (sorry original predates this blog). The wedge-like shape as well as the deteriorating MACD and RSI warn that it is time to vacate this one and move on if not already done. As a comparison below is BAC which (also predictable) did the exact same thing but did go higher but not on a relative basis. Thereafter it did crash, which is not necessarily what must happen to GS, evenso it could.
Bank of America (NT & SA, as it used to be called) now owns Merryll Lynch Pierce Fenner & Smith and Country Wide and according to Mr Lewis this financial machine has the potential of generating about $5 per share which would easily put the stock at $50 in a few years. Then there is Meridith Witney who would not buy any major bank at this time . My guess is that reality is somewhere in the middle. Looking at the chart we have to be mindful of the fact that the ups and downs are not always meaningful (this one went from $17.50 to $ 37.50, predictable by the way, or about 120% before continuing the drop). But when trying to be reasonable one must agree that going from $50 to $2 IS a serious enough drop, we do not have to go further just to get to depression levels. In fact if this correction was an A-B-C X A-B-C then maybe we have seen the lows. First indication is that the move from the low is a 5-wave move (possible the start of a bull market but at the very least a first (out of two) legs up in a corrective rally. Should we drop to about $7-$7.50 this may well be a great buy! Here is the picture in more detail. Do not try this with Citi Group
Bank of America traded as high as 7.67 so using our little rule it would have been sold at 6.50 or above for a minimum gain of 30%.
Back on Jan 27 (you can look it up) I suggested Bank of America would be a buy at $5 or less. It got down to $2.50 or something like that , but suppose you had bought it at $5, then under my little rule you would sell $6.50 as that represents a 30% gain (I do not use “automatic†stop losses). It traded above that so you should be out , but I have little doubt that that is not the case. Nobody follows rules and that is perhaps not a bad thing, it is up to you what rule you set for yourself, what counts is that you have one. Here is the chart.
It is certainly possible that this one goes to $7.50 , and perhaps much further. It is after all too big to fail and now that central bankers actually take it upon themselves to talk up the markets, who knows.
Bank of Italy , as it used to be called , has taught me lots in the 5 years or so that I was there, first as a credit officer, then as one of two in their Global Treasury Management group, a consulting outfit very much like McKinsey & Co without the BS. BAC almost went bankrupt just after I joined. Here is the chart.
The little red arrow is when I joined, the next one when I left. So what does that look like in more detail?
Not that much different from what it has just done, losing about 85%, instead of 95%. More to the point, it took years to get back on its feet! So what is the moral of this story.?
1. There is nothing knew under the sun – so forget about “this time is differentâ€- if you have not seen it you probable have not looked well enough.
2. Black Swans know where you live and will more often than not visit you twice in a life-time even if the “probability†of that happening is 1 in 10 billion.
3. The difference between being filthy rich and just getting by is not always smarts as much as luck, as the alumni of A.E. Ames and other such venerable and distinguished “firms†can tell you.
4. On second thought, maybe silly little rules are good after all. ! Make your own if you wish but stick to them.