Dolby Laboratories, Inc. (NYSE: DLB)

Dolby Laboratories, Inc. develops and delivers products and technologies that are used in the entertainment industry. Its audio technologies are used throughout the global entertainment industry. It is developing and marketing video technologies to improve the quality of video presentation. Its offerings include video products aimed at the cinema market, such as its digital cinema server, its Dolby 3D Digital Cinema products, and its Dolby PRM-4200 Professional Reference Monitor. It offers products and services to content creators, such as studios, broadcasters, and downloadable content service providers to encode content using Dolby’s technologies. The company sells its products and provides services in over 85 countries. In addition, it has licensed its technologies to CE manufacturers and to software vendors in 40 countries, which in turn distribute their products incorporating its technologies throughout the world.

Please take a look at the 1-year chart of DLB (Dolby Laboratories, Inc.) below with my added notations:

DLB is interesting due to the formation of (2) converging support levels. First, an up-trending support level (blue) has developed. Remember, any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. Obviously DLB’s trend line is very important to the stock since it has been tested on multiple occasions. Next, DLB has a key level of $40 (green) that is now acting as support. The stock appears to be pulling back to that $40 level, which is also where the up-trending support level currently sits. A hold of $40 could lead to a run back up to the $45 resistance (red).

The Tale of the Tape: DLB has (2) support levels, both of which currently sit at or near $40. If the stock pulls back to $40 a long trade would be advisable. However, if the stock were to break below $40, thus breaking both supports, a short play should be made instead.

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