Sotheby’s is an auctioneers of authenticated fine and decorative art, jewelry and collectibles. Sotheby’s operations are organized under three segments: Auction, Finance and Dealer. Sotheby’s Auction segment functions principally as an agent by offering authenticated works of art for sale at auction and by brokering private sales of artwork. Sotheby’s also operates as a dealer in works of art through its Dealer segment, conducts art-related financing activities through its Finance segment and is engaged, to a lesser extent, in brand licensing activities. Sotheby’s Finance segment provides certain collectors and art dealers with financing, secured by works of art it either has in its possession or permits borrowers to possess.
To review Sotheby’s stock, please take a look at the 1-year chart of BID (Sotheby’s) below with my added notations:
BID has been in a steady down trend since April and actually came close to hitting a new 52-week low as recently as 2 weeks ago. Along the way, BID has formed a nice trend line of resistance (red). Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. As you can see, BID’s trend line has been tested (4) times already, so it is definitely important to the stock. Also, BID has formed a common support level at $30 (green) over the last (4) months.
The Tale of the Tape: BID has been steadily trending lower most of the year and has created a nice trend line of resistance along the way. A short position could be entered on a rally up to the trend line resistance, or on a break of the $30 support. If you are more bullish on the market and/or this stock, a long position could be entered on a pullback to the $30 support, and a long should be entered if BID broke through the trend line resistance.
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