VMware, Inc. is a provider of virtualization solutions from the desktop to the data center. The Company’s suite of virtualization solutions addresses a range of complex information technology (IT) problems, that include cost and operational inefficiencies, facilitating access to cloud computing capacity, business continuity, software lifecycle management, and corporate computing device management. It works closely with more than 1,700 technology partners, including server, microprocessor, storage, networking and software vendors. Its solutions are based upon its core virtualization technology and are organized into four main product groups: Cloud Infrastructure, Cloud Application Platform, End-User Computing, and Virtualization and Cloud Management.
VMware’s stock is currently trading in the $100 area, so it is obviously a stock on the high end of the price range that I usually like my stocks to be in. However, for the benefit of those traders who like the pricier stocks, I thought I’d analyze it anyway. To review VMware’s stock, please take a look at the 1-year chart of VMW (VMware, Inc. Common Stock) below with my added notations:
I see (3) important price levels on VMW that would interest me: The $100 level (reds), the $95 level (greens), and the $90 level (blues). The stock has recently bounced on the $95 support and is currently sitting at the $100 resistance. Those are the (2) levels I’d be paying attention to at this time. However, if the stock were to break below the $95 level, the $90 level would come back into play for a trade.
The Tale of the Tape: As seen on the chart, VMW has created price levels at $90, $95 and $100. A long trade could be made on a pullback to $95 or a break above $100. In either case, a stop should be placed under the entry level. If you are looking for short trades, positions could be entered at $100 or on a break below $95.
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