The market finally pulled back a bit over the last two days. Although I am personally not bullish on the markets, I know a lot of traders that are. So, if you are one of those traders who is looking to go long, the pullback in the market can be a great time to look to enter stocks pulling back to key levels. One stock in particular that pulled back to a key level yesterday is that of BE Aerospace, Inc.
BE Aerospace, Inc. is a manufacturer of cabin interior products for commercial aircraft and business jets and distributor of aerospace fasteners and consumables. BE sells its products directly to the entire world’s major airlines and aerospace manufacturers. It also designs, engineers and manufactures customized fully integrated thermal and power management solutions for participants in the defense industry, aerospace original equipment manufacturers and the airlines. In addition, it provides aircraft cabin interior reconfiguration, program management and certification services. It operates three segments: Consumables Management Segment, Commercial Aircraft Segment and Business Jet Segment.
Before discussing potential trading opportunities, please take a look at the 1-year chart of BEAV (BE Aerospace, Inc.) below with my added notations:
BEAV has an important, long-term price level at $36 (green/red) and another lower level down at $30 (blue). After breaking below the $36 level in August, BEAV rallied back up and hit that $36 level as resistance on a couple different occasions. Last week, the stock broke back above the $36 level. Now, the market pullback has brought BEAV back down to the $36 for a potential trade.
The Tale of the Tape: Now that BEAV is back above $36, that level should act as support on any pullbacks. A long trade at $36 could be made with an expectation of a run to $40-42. A break below $36 would negate the forecast for a move higher and a short position could be entered with an expectation of a fall back down to the $30 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