PetSmart, Inc. (NASDAQ: PETM)

PetSmart, Inc., together with its subsidiaries, operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada. The company offers consumables, such as pet food, treats, and litter; and hardgoods, which include pet supplies and other goods comprising collars, leashes, health care supplies, grooming and beauty aids, toys, apparel, and pet beds and carriers, as well as aquariums and habitats, accessories, décor, and filters for fish, birds, reptiles, and small pets. It also provides fresh-water fish, small birds, reptiles, and small pets; and pet services, such as grooming, including precision cuts, baths, nail trimming and grinding, and teeth brushing, as well as training, boarding, and day camp services. In addition, the company operates PetsHotels that offer boarding for dogs and cats; provides personalized pet care, an on-call veterinarian, temperature controlled rooms and suites, daily specialty treats and play time, and day camp services for dogs; and operates veterinary hospitals, which offer services comprising routine examinations and vaccinations, dental care, a pharmacy, and surgical procedures.

To review PetSmart’s stock, please take a look at the 1-year chart of PETM (PetSmart, Inc.) below with my added notations:

1-year chart of PETM (PetSmart, Inc.)

After trending higher for most of the last year, PETM has been consolidating within a small Rectangle over the last 2+ months. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. For PETM, the Rectangle pattern has formed a $70 resistance (blue) and a $65 support (navy).  A break above $70 would also be a new 52-week high.

The Tale of the Tape: PETM has formed a small Rectangle pattern. The possible long positions on PETM would be either on a pullback to $65, or on a breakout above $70. The ideal short opportunity would be on a break below $65.

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