Today’s Big Stock: Becton, Dickinson and Company (NYSE: BDX)

Whether the market goes up, or the market goes down, I like to trade stocks that provide me with clear trading opportunities either way. This could be in the form of a pattern, visibly important levels, or maybe a little bit of both. My belief is that knowing where to get in is half the battle. If you can find stocks that clearly show you their most important price points, then you will most likely be setting yourself up for success.

Becton, Dickinson and Company is a global medical technology company engaged in the development, manufacture and sale of medical devices, instrument systems and reagents used by healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry and the general public. BD’s operations consist of three business segments: BD Medical, BD Diagnostics and BD Biosciences. On November 19, 2009, BD acquired 100% of the outstanding shares of HandyLab, Inc., a company that develops and manufactures molecular diagnostic assays and automation platforms. In 2010 (fiscal 2010), the company sold the Ophthalmic Systems unit, as well as the surgical blades, critical care and extended dwell catheter product platforms of the Medical Surgical Systems unit.

Please take a look at the 1-year chart of BDX (Becton, Dickinson and Company) below with my added notations:

Notice the important price levels I have highlighted on BDX. The stock seems to always find support or resistance on or at the increments of $5. First, for the last (7) months, BDX has formed a clear $80 resistance (black).  Next, you can see how $75 has acted as both support (green) and resistance (red) over the last (8) months. Lastly, from October through December the $70 level acted as a lower level of support (blue).

The great thing about BDX is that it shows you how to trade it no matter what direction the market moves. If you like the short side of the market, you can short BDX on rallies back up to any $5 level. If you want a long play, you could buy BDX on any pullback to a $5 level or breakout through one of those levels.

The Tale of the Tape: BDX finds the levels of $5 important. If the stock rallies back up to $80, you could enter a short play. If it breaks back above $80, you could enter a long play. You could buy BDX if it comes down to $75, or short the stock if it breaks that $75 support. Etc., etc., etc!

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