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What's Happening

Goldman Sachs ( GS ) will report its fourth-quarter results before the market open January 17. Analysts forecast the company to report earnings of $4.90 per share, down slightly from $5.08 during the same period last year. GS shares have risen 15.0% since the end of June.

Technical Analysis

GS was recently trading at $255.13, down $7.01 from its 12-month high and $45.51 above its 12-month low. Technical indicators for GS are bullish with a strong upward trend. The stock has recent support above $251.50 and recent resistance below $259.75. Of the 19 analysts who cover the stock, eight rate it a "strong buy", 10 rate it a "hold", and one rates it a "strong sell". GS gets a score of 60 from InvestorsObserver's Stock Score Report.

Analyst's Thoughts

Goldman Sachs has trended higher over the last four months, and shares are currently just pennies below an all-time high. Despite trading at record levels, the stock remains attractively valued with a P/E of 13.3, and earnings are expected to rise 13.35% per annum over the next five years. The market is bullish on the financial sector, with higher interest rates, tax reform, and low unemployment all working in the sector's favor. Last quarter the company posted much stronger than expected profits and sales, which helped push the stock to its current record levels. Given the low valuation, the stock should move higher on another earnings beat. GS is trading at , with an average price target of $271.15.

Stock Only Trade

If you're looking to establish a long stock position in GS, consider buying the stock under $255.00. Sell if it falls below $230.00 or take profits if it gets to $293.00.

Bullish Trade

If you want a bullish hedged trade on the stock, consider an April 215/220 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (32.4% annualized*) and the stock would have to fall 13.6% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider an April 285/290 bear-call credit spread for a $0.60 credit. That's a potential 13.6% return (50.8% annualized*) and the stock would have to rise 12.0% to cause a problem.

Covered Call Trade

If you like the stock, but wish to lower your cost basis on a new position, you may want to consider an April $255.00 covered call. Buy GS shares (typically 100 shares, scale as appropriate), while selling the April $255.00 call for a debit of $243.45 per share. The trade has a target assigned return of 4.7%, and a target annualized return of 17.8% (for comparison purposes only).
Originally published on InvestorsObserver.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.

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