Mercadolibre Inc. (NASDAQ: MELI)

Mercadolibre, Inc., together with its subsidiaries, hosts online commerce and payments platforms in Latin America. Its services are designed to provide its users with mechanisms to buy, sell, pay for, and collect on e-commerce transactions. The company principally offers MercadoLibre marketplace, an automated online commerce service. Its MercadoLibre marketplace enables registered users to list and purchase motor vehicles, vessels, aircraft, real estate, and other services through online classified listings. The company also provides MercadoPago, an integrated online payments solution to facilitate transactions on and off the MercadoLibre marketplace by providing a mechanism that allows its users to send and receive payments online. In addition, it offers MercadoClics advertising program that allows businesses to promote their products and services on the Internet. This program enables users and advertisers to place, display, and/or text advertisements on its Web pages to promote their brands and offerings. Further, the company provides MercadoShops on-line stores solution, a software-as-a-service, which allows users to set-up, manage, and promote their own on-line Webstores.

To review Mercadolibre’s stock for potential trading opportunities, please take a look at the 1-year chart of MELI (Mercadolibre, Inc.) below with my added notations:

1-year chart of MELI (Mercadolibre, Inc.)

Over the last (3) months, MELI has been consolidating within a common chart pattern known as a rectangle. A rectangle pattern forms when a stock gets stuck bouncing between a horizontal support and resistance. For MELI, the rectangle pattern has formed a clear $90 resistance (red) and an $80 support (teal). You will also notice that MELI’s $80 support has been a previous resistance and support.

The Tale of the Tape: MELI is stuck between $80 and $90. A long play could be made on a pullback to $80 or on a break above $90, with a stop placed below the level of entry. A short position could be entered on a break below $80 with a stop above that level.

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