When it comes to entering a stock hitting a 52-week high, I prefer to look for ones hitting a “NEW” high. To me, his would be a stock that hasn’t hit a new 52-week high in quite some time. In addition, and more importantly, I want the stock to have broken through a key area of resistance. This way I know that it wasn’t just any move higher. One such stock that fits that description would be that of Thoratech Corporation.
Thoratec Corporation is a manufacture of mechanical circulatory support with a product portfolio to treat a range of clinical needs for advanced heart failure patients. The Company develops, manufactures and markets medical devices used for circulatory support. Its primary product lines are the ventricular assist devices: the HeartMate II Left Ventricular Assist System, the HeartMate Left Ventricular Assist System, the Thoratec Paracorporeal Ventricular Assist Device, and the Thoratec Implantable Ventricular Assist Device.
To review Thoratech Corporation’s stock, please take a look at the 1-year chart of THOR (Thoratech Corporation) below with my added notations:
THOR has been trading sideways for the last 5 months, while running into resistance at $36 (navy). That $36 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if WPRT could manage to break above it. The stock finally broke through that $36 resistance last week. This is definitely the “NEW” 52-week high resistance breakout I like to see. From here, the stock should be heading higher, most likely on a new uptrend.
Be aware though, THOR tried to breakout back in July only to fail and fall back down to the $30 support level (green).
The Tale of the Tape: THOR had formed a key resistance level of $36, which could be considered a 52-week high breakout since THOR broke above it last week. This stock should be moving higher from here. A long trade could be entered now, or if THOR pulls back a bit further to $36, with a stop set below the $36 level. A break below $36 would negate this forecast and might signal another fake out such as in July. If the market were to sell-off substantially, and bring THOR back down to $30 (green), a long position could also be entered there with a stop below that 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