Wall Street is cashing in on a dealmaking boom — ride the momentum on Goldman and Morgan Stanley

Verdict: promising thesis, but wait for entry conditions to trigger

The dealmaking thesis has genuine teeth: per Reuters, both Goldman Sachs and Morgan Stanley posted trading- and advisory-fueled profit beats, with GS diluted EPS surging 153.9% year-over-year to $51.32 and ROE landing in the 81st percentile of Financials peers. The backtested strategy returned 24.2% on an untouched 12-month holdout with a 46.0% win rate and 10.7% drawdown, and nearby EMA and RSI parameter variants produced nearly identical holdout results — so the configured baseline was not cherry-picked. The most serious problem is Goldman's free cash flow, which sits at negative $47.2 billion (0th percentile among Financials peers), even as the idea depends on GS capitalizing on dealmaking; meanwhile MS already has RSI below 40 at 38.72, meaning its exit rules are active and the setup is moving further from entry, not closer. JPM is the closest to a trigger, with price just $0.06 below its 10-day EMA and RSI at 54.56, but GS and MS need meaningful momentum restoration before this basket is live. Conviction sits at a cautious 62 composite — the idea is thesis-supportive and the holdout evidence is real, but the setup is currently waiting on its entry conditions and geopolitical risk from the Iran shipping disruption could spike volatility and suppress the dealmaking pipeline the thesis depends on. **Conviction breakdown:** Thesis support 72 · Trade readiness 38 · Risk quality 55 · Backtest evidence 68 · Fundamentals trend 78

Trade now

**Do not buy yet — the strategy is waiting for its entry conditions.** For Goldman Sachs (GS), which last closed at $1,065.22, several conditions are not met. Price needs to be above the 10-day EMA, currently at $1,090.48 — roughly $25 away. RSI (14) is 44.9, and the strategy requires it above 50 (about five points short). ADX (14) sits at 10.4, well below the required threshold of 20. The setup is also looking for price below the Bollinger Band at $1,066.71, which is technically satisfied at current levels. Morgan Stanley (MS) is in similar shape. Last closing at $215.50, price is about $5.65 below the 10-day EMA at $221.15. RSI (14) at 38.7 is more than 11 points below the 50 threshold, and ADX (14) at 4.3 is far below the required 20. Both primary names lack the trend strength and momentum the strategy needs before entering. Once triggered, risk is defined. The hard stop loss exits if unrealized P&L reaches -2.4%, and take profit targets +4.8%. That yields roughly a 2:1 reward-to-risk ratio. Additionally, a time stop closes any position after 60 calendar days, and Fibonacci-based stop and target levels apply as secondary exits. "Wait" means setting price or indicator alerts at the levels above and executing only when the daily candle confirms all entry conditions are satisfied.

Why the dealmaking boom thesis has real fundamental legs

The idea's core thesis — that a resurgent M&A pipeline is directly fueling Wall Street profits — is backed by hard numbers from the two target banks. Per the Reuters piece on Goldman Sachs, the bank posted a trading and deal-fueled profit beat, and the fundamentals confirm it: Goldman's diluted EPS grew a staggering 153.9% year-over-year to $51.32, with return on equity climbing to 13.7% — landing in the 81st percentile of Financials sector peers. Morgan Stanley tells the same story, with EPS up 28.4% to $10.21 and ROE at 15.1% (85th percentile among peers), validating the Reuters report that MS beat estimates on a dealmaking boost and strong trading. The catalyst is tangible. The thesis highlights Stripe's reported $53 billion bid for PayPal (per the CNBC report on the takeover interest from Stripe and Advent), arguing this signals a broader revival in…

Scores

• Conviction score breakdown: 62
• Thesis support: 72
• Trade readiness: 38
• Risk quality: 55
• Backtest evidence: 68
• Fundamentals trend: 78

Watch items

• GS — Price vs 10-day EMA
• GS — RSI (14)
• GS — ADX (14)
• MS — Price vs 10-day EMA
• MS — RSI (14)
• MS — ADX (14)
• JPM — Price vs 10-day EMA
• GS — RSI (14)
• MS — RSI (14)
• GS — Price above EMA (10)
• GS — RSI (14) above 50
• GS — ADX (14) above 20
• GS — ADX (14) above 18
• GS — Price below Bollinger (20)