Avnet, Inc., together with its subsidiaries, is an industrial distributor of electronic components, enterprise computer and storage products and embedded subsystems. It distributes electronic components, computer products and software as received from its suppliers or with assembly or other value added by Avnet. It provides engineering design, materials management and logistics services, system integration and configuration, and supply chain services. It has two primary operating groups: Electronics Marketing, which markets and sells semiconductors and interconnect, electromechanical devices and embedded products, and Technology Solutions, which markets and sells mid- to high-end servers, data storage and software.
To review potential trading opportunities with Avnet’s stock, please take a look at the 1-year chart of AVT (Avnet, Inc.) below with my added notations:
After trending higher since last fall, AVT formed what appeared to be a Triple Top price pattern (red). Triple Tops are reversal patterns that are as simple as they sound: Rallying up to approximately the same point on (3) different occasions (T) while finding the same support twice in between the tops. As with any price pattern, a confirmation of the pattern is needed. AVT would confirm this pattern by breaking the $34 support (black) that was created by the Triple Top pattern, which the stock did last week.
Keep in mind that simple is usually better. Had I never pointed out the Triple Top pattern, one would still think this stock is moving lower simply because it broke below the $34 support level. So, whether you noticed the pattern or not, the trade would still be the same.
The Tale of the Tape: AVT formed a Triple Top price pattern with a $34 support level and the stock has confirmed the pattern by breaking support. A short trade should be placed on any rally up to $34 with a stop set above $34. A break back above $34 would negate the forecast for a move lower.
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