Todays Big Stock: Polaris Industries Inc. Common (NYSE: PII)

In several of the articles I have written over the last several months I have discussed potential 52-week high breakout opportunities. With those opportunities, I always like to review stocks that would be breaking key resistance levels in the process of hitting their new high. Earlier this week, I looked at a stock that had already broken to a new 52-week high, Family Dollar Stores, Inc. Today, I will review another such example: Polaris Industries, Inc.

Polaris Industries Inc. designs, engineers and manufactures off-road vehicles, including all-terrain vehicles and side-by-side vehicles for recreational and utility use, snowmobiles, and on-road vehicles, including motorcycles and low emission vehicles, together with the related replacement parts, garments and accessories. These products are sold through dealers and distributors principally located in the United States, Canada and Europe.

To review Polaris Industries’ stock for potential trading opportunities, please take a look at the 1-year chart of PII (Polaris Industries, Inc.) below with my added notations:

For the last 4 months, PII had a resistance level at $60 (navy). This resistance level was a 52-week high breakout when the stock shot higher last week. This breakout should be a sign that the stock is moving overall higher. However, that certainly doesn’t mean that the stock can’t pull back first, which it has actually already done. The old $60 resistance is currently providing support for PII, as it should. On a very short-term basis, the next area of resistance appears to be taking shape around the $65 level (l. blue).

The Tale of the Tape: PII broke out to a new 52-week high last week and has now pulled back to that level as support. A long trade could be made at $60, or on a break above $65, with a stop placed below the level of entry. A break below $60 would negate the forecast for PII’s move higher.

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