Today’s Big Stock: Magna International Inc (NYSE: MGA)

Magna International Inc. is a diversified global automotive supplier. It designs, develops and manufactures technologically advanced automotive systems, assemblies, modules and components, and engineer and assemble complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks. It operates in three reporting segments-North America, Europe and Rest of World. At year-end 2010, Magna had 256 manufacturing operations and 82 product development, engineering and sales centers, in 26 countries. The company’s capabilities include interior systems, seating systems, closure systems, body and chassis systems, vision systems, electronic systems, exterior systems, roof systems, powertrain systems, vehicle engineering and contract assembly and hybrid and electric vehicles/systems. Magna’s products include CellForm Lightweight Structural Composite and FutureForm Thin Seat.

To analyze Magna’s stock for potential trading opportunities, please take a look at the 1-year chart of MGA (Magna International Inc.) below with my added notations:

 

 

MGA sold off drastically in August with the overall market. After moving mostly sideways from August until January, MGA broke back above its previous breakdown level of $45 (navy). Now that the stock is back above $45, that level should act as support again. In addition, I have highlighted the tendency for $50 (red) to act as either support or resistance in the past.

The Tale of the Tape: MGA is currently trading between its levels of $45 and $50. A long position could be entered on a pullback to $45 or on a break above $50 with a stop placed below the level of entry. However, if you are bearish on the stock or overall market, a short trade could be made on a break below the $45 or on a test of the $50 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!

Good luck!
Christian Tharp, CMT