Red Hat, Inc. (NYSE: RHT)

Sometimes trading in the stock market can be complicated, and at times, confusing. However, there are some trading opportunities that are clear and somewhat obvious. One potentially simple trading opportunity would be for the stock of Red Hat, Inc.

Red Hat, Inc. provides open source software solutions to enterprise customers worldwide. The company also offers enterprise-ready open source operating system platforms. Its products include Red Hat Enterprise Linux, an operating system designed for enterprise computing; Red Hat JBoss Middleware, which offers a range of middleware offerings for developing, deploying, and managing applications, such as hotel and airline reservation systems, online banking, credit card processing, securities trading, healthcare systems, customer and partner portals, retail and point-of-sale systems, and telecommunications network infrastructure that are accessible through the Internet, corporate intranets, extranets, clouds, and virtual private networks; and Red Hat Virtualization, a virtualization solution for server and desktop computers that combines the kernel-based virtual machine hypervisor with the oVirt open source virtualization management system. In addition, the company offers other Red Hat enterprise technologies, including Red Hat Messaging, Real-time, and Grid that integrates open and scalable messaging; and Red Hat Directory Server that centralizes application settings, user profiles, group data, policies, and access control information into a network-based registry. Further, it provides various cloud, storage, and systems management offerings, as well as offers training, consulting, and support services.

Please take a look at the 1-year chart of RHT (Red Hat, Inc.) below with my added notations:

1-year chart of RHT (Red Hat, Inc.)

It’s relatively straightforward. RHT has been holding a very important level of support at $50 (navy) for the last (8) months. No matter what the market has or has not done over that period of time, RHT has not broken below that area of support. If the market should move lower, RHT would most likely break that support and move lower from there.

The Tale of the Tape: RHT has held a strong level of support at $50. If the stock were to approach that level again, a trader could enter a long position with a stop placed under the level. If RHT were to break below the support, a short position would be recommended 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