As I stated in the ACTG article I wrote, trading in the stock market can at times be complicated, confusing and challenging to know what trade to make and when to make it. However, there are those trading opportunities like ACTG that are clear and somewhat obvious. Keep in mind that clear, obvious or not, that doesn’t necessarily mean the trade will always work out in your favor. Another stock that appears to have a “simple” trading opportunity would be that of Sify Technologies Limited.
Sify Technologies Limited (Sify) is an integrated Internet, network and electronic commerce services companies in India, offering end-to-end solutions with a range of services delivered over a common Internet backbone infrastructure. Sify’s services enable its business and consumer customers to communicate, transmit and share information, access online content and conduct business remotely using its private data network or the Internet. Sify’s segments comprised: corporate network/data services, which provides Internet, connectivity, security and consulting, hosting and managed service solutions; Internet access services, from homes and through cybercafes, online portal services and content offerings, and other services, such as development of e-learning software.
Before discussing potential trading opportunities, please take a look at the 1-year chart of SIFY (Sify Technologies Limited) below with my added notations:
Although I don’t normally look at stocks below $10, I know a lot of traders do. Well, isn’t the trade on SIFY relatively obvious? SIFY had been holding a very important level of support at $4 for several months. After breaking lower, the stock rallied back above that $4 level at the end of October. Now that SIFY is back above $4, traders would expect that level to start acting as support again if the stock were to ever come back down to it.
The Tale of the Tape: SIFY has a very important support level at $4. If the stock were to approach that level again, a trader could enter a long position with a stop under that level. However, if SIFY were to break that support, a short position could be entered with the expectation of a fall down to the $3 area.
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