Todays Big Stock: Shutterfly, Inc. (NasdaqGS: SFLY)

Shutterfly, Inc. is an internet-based social expression and personal publishing service that enables consumers to share, print and preserve their memories and its technology, manufacturing, web-design and merchandising capabilities. Shutterfly provides a range of personalized photo-based products and services that allow consumers to upload, edit, enhance, organize, find, share, create, print, and preserve their memories. It generates revenues by producing and selling professionally bound photo books, greeting cards and stationery, personalized calendars, other photo-based merchandise and prints ranging in size from wallet-sized to jumbo-sized enlargements. It manufactures most of these items in its Charlotte, North Carolina and Phoenix, Arizona production facilities. It also sells a variety of print and photo-based merchandise that is manufactured for it by third parties.

To analyze Shutterfly’s stock for potential trading opportunities, please take a look at the 1-year chart of SFLY (Shutterfly, Inc) below with my added notations:

SFLY could be in the process of forming a common chart pattern known as a Rectangle. The pattern is being formed with the combination of the $41 support (green) and the $50 resistance (red). The $50 level was also important as support in April and June. If this pattern is in fact forming, the declining volume a trader would expect is in place. This decline in volume is the typical “calm before the storm” leading up to the breakout. Some traders will watch this pattern to see which way the stock breaks, either through the $50 resistance or below the $41 support, before entering a trade. More active traders could look at additional trading opportunities at $50 or on another pullback to $41.

 

The Tale of the Tape: Regardless of the potential Rectangle pattern being formed, SFLY is trading within the range of two important price levels at $41 and $50. Long trades could be made if SFLY breaks through the $50 resistance or pulls back to the $41 support with a stop placed below the level of entry. Or, short plays could be made on a rise to $50 or on a break below $41 with a stop placed above whichever level is entered.

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!

 

Good luck!

Christian Tharp, CMT