Watsco Inc. (NYSE: WSO)

Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, and refrigeration equipment in the United States. It distributes residential central air conditioners; gas, electric, and oil furnaces; commercial air conditioning and heating equipment and systems; and other specialized equipments. The company also distributes various parts, including replacement compressors, evaporator coils, motors, and other component parts; and supplies comprising thermostats, insulation material, refrigerants, ductwork, grills, registers, sheet metal, tools, copper tubing, concrete pads, tape, adhesives, and other ancillary supplies. It serves approximately 50,000 contractors and dealers that service the replacement and new construction markets. The company also exports its products to Latin America and the Caribbean. Watsco, Inc. was founded in 1945 and is headquartered in Miami, Florida.

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

1-year chart of WSO (Watsco, Inc.)

For the entire year shown above, WSO has always seemed to find support or resistance on or at the increments of $5. First, notice the $65 level (blue) that was most recently support. Next, you can see the common levels of $70 (navy) and $75 (red). At the very top end you can see the $80 resistance (purple). The nice thing about WSO is that it shows you how to trade it no matter what direction the market moves.

The Tale of the Tape: WSO finds the levels of $5 important. If the stock pulls back to the $70 level or breaks through $75 you could enter a long play. If it breaks below $70 or rallies up to $75 you could enter a short play. All the levels of 5 provide potential trades.

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