Todays Big Stock: TRW Automotive Holdings Corpora (NYSE: TRW)

TRW Automotive Holdings Corp. is a diversified supplier of automotive systems, modules and components to automotive original equipment manufacturers and related aftermarkets. It conducts substantially all of its operations through subsidiaries. These operations encompass the design, manufacture and sale of active and passive safety related products. Active safety related products refer to vehicle dynamic controls, and passive safety related products principally refer to occupant restraints (primarily airbags and seat belts) and safety electronics (electronic control units and crash and occupant weight sensors). TRW operates in four segments: Chassis Systems, Occupant Safety Systems, Electronics and Automotive Components.

Please take a look at the 1-year chart of TRW (TRW Automotive Corp.) below with my added notations:

Notice all of the important price levels I have highlighted on TRW. Over the last 3 months, the stock seems to always find support or resistance on or at the increments of $5. First, notice the $45, topside resistance (red). Next, you can see the common $40 (navy) and $35 (green) levels. In October, the stock bottomed at $30 (pink). The great thing about TRW is that it shows you how to trade it no matter what direction the market moves. If you like the short side of the market, you can short TRW on rallies back up to any $5 level. If you want a long play, you could buy TRW on any pullback to a $5 level or breakout through one of those levels.

The Tale of the Tape: TRW finds the levels of $5 important. These price points always appear to act as either support or resistance or usually both. You can trade this stock no matter what it does. If it rallies back up to $40, you could enter a short play. If it breaks back above $40, you could enter a long play. You could buy TRW if it comes down to $35, or short the stock if it breaks that $35 support. Etc., etc., etc!

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