Easy Trade of the Day:
WDC starts to pull back
WDC had been in a solid downtrend going into May. However, over the past several months the stock had also created a key level of resistance at $50 (green). A break above that $50 level should mean higher prices for the stock, and last week WDC finally broke that resistance.
The Tale of the Tape:
WDC broke through its key level of resistance at $50. A long trade could be entered on a pull back down to that level. However, a break back below $50 could negate the forecast for a higher move and would be an opportunity to get short the stock.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT