"Was at time when I wasn't sure
But you set me mind at ease
There is no doubt you're in my head now"
-Patience - Guns N' Roses

Tell ya what - there were four bands if any that could equal the energy of GNR back in the 1980's. Axl may have been out there, but the guy was talented.

I don't know how many of you folks enjoy fishing, but one of the keys to any successful fishing trip is patience. If you are sight fishing for Bonefish in the backcountry of the Florida Keys, you can spend hours in the hot sun before an opportunity to cast for a fish presents itself. However, once that opportunity shows itself, you have to be ready to act.

On Tuesday, such an opportunity came front and center in the form of Goldman Sachs (GS). Goldman has seen its stock price plummet from $250.70 sometime around Halloween, to current levels of $164.00. Now it would be one thing if this move came on the back of a terrible quarter but in the case of GS that's not the case. On December 18th, Goldman Sachs reported 4th quarter EPS of $7.01 versus Street consensus of $6.61 on revenues of $10.74 billion versus consensus of $10.12 billion. One off quarter you say? Well on September 20th, Goldman reported a 3rd quarter of $6.13 versus consensus of $4.37 on revenues of $12.33 billion versus consensus of $9.57 billion. I will spare you all the tedium of going further back in time but Goldman, since becoming a publicly traded company has rarely if ever disappointed.

Now I am fully aware of the issues and headwinds the investment banks have been facing and continue to face. There is no doubt that even Goldman has endured a difficult quarter. To that end, Goldman Sachs has seen estimates for its quarter reduced no fewer than nine times by Street analysts. On top of that, a Wall Street Journal "Heard On The Street" column asked if Goldman Sachs was going to see its smallest quarterly profit in three years. The column highlighted the 16% drop in share price in its stake of Industrial & Commercial Bank of China.

But just as the market can overshoot on the upside in bull markets, it can just as easily overshoot on the downside in bear markets. I think we saw the capitulation on Tuesday in GS and there is precedent to back up my assertion. On August 16th, Goldman shares had a volatile day. Opening at $163.10, Goldman shares made a high of $171.41, a low of $157.38 and closed at $169.85 on total trading volume of more than 31 million shares. That share volume represented about three times normal trading volume on an extreme low. Tuesday, we saw very similar trading activity. On north of 20 million shares, the company saw another capitulation type of day.

Understanding that book value and valuations for the investment bankers in this environment is difficult to gauge, GS currently trades at 6.50 times trailing and 7.5 times forward earnings. At 1.60 times price to book, Goldman Sachs is at the lower end of historic valuations. Goldman is due to report on Tuesday, March 18th. The "Street" is looking for EPS of $3.22 on revenues of $8.72 billion. Goldman has made no comments publicly to indicate it's on track for a big miss. There's no question that with Lloyd Blankfein running the show, Goldman Sachs has one of the best management teams on Wall Street if not the entire United States. I for one will be anxiously awaiting the earnings release this Tuesday.

The trade sets up as cut and dry as I have seen since last August. One can enter into a long position in GS at current levels of $167.00. A good stop loss to use would be on any close below the 52 week low of $155.23. For traders with less risk appetite, you may consider exiting your long position ahead of earnings next week. For those that enjoy the adrenaline rush, stick to your guns with the same stop loss level. If this pans out the way I think it will, Goldman can easily trade back to the $190 level on even a benign tape.