Please take a look at the 1-year chart of TMO (Thermo Fisher Scientific, Inc.) below with my added notations:
The Tale of the Tape: Now that TMO has broken above $55, that level would be expected to act as support. A long trade could be entered on a pullback to that $55 level with a stop placed below $55. If the stock were to continue higher instead, a short trade could be made at $60 or a long trade on a break back above $60. Finally, if the TMO were to break below $55, a short trade could be made and then a long trade could be made at the $50 level.
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