The market has had a challenging week. However, this may have provided the necessary pullback for some stocks if we are to get a “Santa Claus Rally” this year. One stock that has pulled back to a key level of support is that of McDermott International, Inc.
McDermott International, Inc. is an engineering, procurement, construction and installation company. McDermott focuses on designing and executing complex offshore oil and gas projects worldwide. The company delivers fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning. It supports these activities with project management and procurement services. Its customers include national and energy companies and it operate in most offshore oil and gas producing regions worldwide. MII operates in five primary business segments: Asia Pacific, Atlantic, Caspian, the Middle East and Corporate. Its corporate segment primarily reflects corporate personnel and activities, incentive compensation programs.
To discuss potential trading opportunities on McDermott, please take a look at the 1-year chart of MDR (McDermott International, Inc.) below with my added notations:
The first thing I’d like you to notice is the $10 support level (navy) that I referenced in this article’s title. Counting this week, MDR has had (4) successful tests of this support. In addition, you will notice the important level at $12, which has been both support (purple) and resistance (teal). MDR has tested the $12 level a total of (5) times, so it is an important level to the stock. For future reference, if MDR should ever happen to rally above the $12 level, I have highlighted the previous level at $15 (green) from back in August, September and October.
The Tale of the Tape: MDR currently has (2) important levels to watch: $10 and $12. If MDR pulls back down to $10, traders would want to enter a long position with a stop set below that level. However, if the stock rallies back up to $12, or breaks below $10, you could enter a short play. You could also buy MDR if it breaks above $12.
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