Weekend Trader Series
October 30, 2022
Open Positions Update
There are no portfolio updates this week.The following is this week's recommendation:
Goldman Sachs (GS)Place a limit order to buy the Goldman Sachs (GS) January 20, 2023 340-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, October 28, this option was offered at $21.25. GS closed at $341.82 on Friday, October 28.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, November 28, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Goldman Sachs (GS) stock is showing signs of life. Since June, the security has staged multiple pullbacks to its ascending 36-month (or three-year) moving average, as well as its 2018 peak. Furthermore, the equity just pushed above its 252-day moving average, which acted as resistance in September, just one day after moving above a trendline of potential resistance from its lower highs since August.
The equity is also fresh off a positive post-earnings reaction, and last week closed above a trendline connecting lower highs since November 21. Plus, GS is above the $336 level, which is 1.2 times its June closing low, and $339, which is 0.8 times its all-time closing high.
Short interest hit its highest level in over two years in mid-August. Now, shorts are in the early stages of covering, with total short interest still about 20% above this year’s low point in May. Anyone that shorted since May is now underwater.
Analysts have been growing increasingly cautious on GS despite its recent rally, which could signal a big shift in trend, with several downgrades since July. Our recommended January 2023 340-strike call has a leverage ratio of 4.8 and will double in value on an 11.8% pop in the underlying shares.
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