I’m bullish on AMAT, here’s my entry
In stock trading, your enemies and
your friends tend to switch roles quickly and often. No, I’m not
referring to the analyst that finally upgraded your favorite stock or the market
maker that can’t make up his mind. I’m referring to price levels, specifically
support and resistance levels, and one of my favorite rules of technical
analysis:
Broken Levels of Resistance are
Automatically New Levels of Support
For a current example, let’s take a look at a 6 month chart of
Applied Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating):
Notice how late this summer, AMAT was unable to make a
significant move above 18.50, even making a double top and confirming it as a
solid resistance level as the stock moved lower over the next few months.
Well, fortunately for AMAT shareholders, things have recently
taken a turn for the better. If you look closely, you will notice how once the
stock broke 18.50, not only did it breakout to new highs, but it also confirmed
18.50 as a new support level, bouncing upwards off of it twice. This is a great
example of an old resistance level becoming support immediately after being
broken.
Now AMAT is pulling back a little bit and starting to test the
uptrend line that has held successfully for the past six weeks. At just under
19.00, this could be a good opportunity to start picking up some shares of AMAT
on a pullback from their recent high. You will have an uptrend line as initial
support, and a former double-top resistance line at 18.50 as primary support.
From a risk/reward standpoint, you can’t ask for a much better
setup than that.
Learn from me as you watch me trade and get
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Room…
Andy Swan
Andy Swan created and
co-founded DaytradeTeam five years ago on a principle of empowering
individual stock and options traders with the techniques and analysis methods
typically reserved for elite professionals. His expertise in technical analysis
and commitment to educating members earned DaytradeTeam a top-ranking among
advisory services for several years.