With the market starting to pull back again, it’s time to start watching some of your stocks for pullbacks to important levels IF you are still bullish on the overall market. A stock that may be pulling back to a key level now would be that of Harley-Davidson, Inc.
Harley-Davidson, Inc. operates in two segments: the Motorcycles and Related Products (motorcycles) segment and the Financial Services (Financial Services) segment. The motorcycles segment designs, manufactures and sells at wholesale heavyweight cruiser and touring motorcycles as well as a line of motorcycle parts, accessories, general merchandise and related services. The company conducts business on a global basis, with sales in North America, Europe/Middle East/Africa (EMEA), Asia/Pacific and Latin America. The motorcycles segment includes the Harley-Davidson and Buell product lines.
To analyze Harley-Davidson’s stock for potential trading opportunities, please take a look at the 1-year chart of HOG (Harley-Davidson, Inc) below with my added notations:
The trade on HOG is relatively simple. $35 has been an important level to HOG over the last 8-9 months. After stalling at $35 back in December and January, HOG found support at $35 in both June and August. When HOG fell below the $35 mark in mid-August, the stock quickly rallied back up to that level to find brief resistance there. Since hitting $39 last week, HOG has started to pullback and seems to be on its way back down to the $35 level.
The Tale of the Tape: HOG has an important price level at $35. If the stock continues to move lower, a long trade could be entered at $35 with a stop placed under $35. However, if HOG breaks below $35, then a short trade would be advisable with a stop above the level.
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