Goldman Sachs' Relative Strength Line At New High


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When a stock gets hammered big time, some investors like to see three waves down before they trust the troubles are over.

Investment bankerGoldman Sachs ( GS ) has taken three gut punches. Although the monthly chart shows that the retreats haven't involved lower lows, the sell-offs were sharp enough to test even the strongest holders.

From October 2007 to November 2008, Goldman's stock lost 81% of its value.

From October 2009 to July 2010, the stock sank 33% off its most-recent high.

From January 2011 to October 2011, Goldman slid 52% off its most-recent high.

Considering how hard financials were hit by the recession and the regulatory uncertainty that followed, Goldman's struggles weren't surprising.

The five-year Earnings Stability Factor is 69 on a scale that runs from 0 (calm) to 99 (wild). The three-year Earnings Stability Factor improved to 32.

Circumstances generally are improving for Goldman's Bank-Money Centers industry group. As of Monday's IBD, the group was No. 19 among 197 groups in six-month price performance.

In the past two quarters, Goldman's revenue growth jumped 82% and 39% vs. the year-ago periods. Earnings grew to $2.85 a share in Q3 vs. a year-ago loss and to $5.60 a share in Q4, up 204% vs. the year-ago quarter. After-tax margin was 26% in Q4, the best in 12 quarters.

The Q4 earnings growth trounced the Street's consensus estimate by 48%.

Uncertainties surrounding Goldman are primarily tied to a lack of clarity on regulations. The question marks include the Volcker Rule, Basel 3 capital requirements and Dodd-Frank.

The dividend held steady at 35 cents a share through the recession until early 2012. The payout was raised to 46 cents a share payable in Q2 2012 and boosted to 50 cents a share payable in Q4 2012.

The annualized yield is 1.3%.

The stock's RS line has been rising since July and is at a 52-week high. Goldman Sachs is extended from a first-stage base and has risen in eight of the past nine weeks.

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

This article appears in: Personal Finance Investing Ideas
Referenced Stocks: GS

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