Comcast Corporation (NASDAQ: CMCSK)

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Comcast Corporation provides entertainment, information, and communications products and services in the United States and internationally. The company’s Cable Communications segment offers video, high-speed Internet, and voice services to residential and business customers. Its Cable Networks segment consists of national cable entertainment, national cable news and information, national cable sports, regional sports and news, and international cable networks. Its Filmed Entertainment segment consists of the operations of Universal Pictures, including Focus Features, which produces, acquires, markets, and distributes filmed entertainment worldwide in various media formats for theatrical, home entertainment, television, and other distribution platforms. This segment also develops, produces, and licenses stage plays. The company’s Theme Parks segment comprises theme parks; studios; and a dining, retail, and entertainment complex. The company offers its services directly to residential and business customers through call centers; door-to-door selling; direct mail, television, Internet, and local media advertising; and telemarketing and retail outlets.

Comcast’s stock is potentially forming a Head and Shoulders pattern. Please take a look at the 1-year chart of CMCSK (Comcast Corporation) below with my added notations:

1-year chart of CMCSK (Comcast Corporation)

CMCSK has been on a nonstop rally since last year. Over the last (3) months though, the stock has created a very important level at $34 (navy), which would also be the “neckline” support for CMCSK’s possible H&S pattern. Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S would occur if the stock broke below its $34 support. If CMCSK breaks that level, the stock should move lower from there. A move above the $36 area would probably negate the potential H&S pattern.

Keep in mind that simple is usually better. Had I never pointed out this H&S pattern, one would still think this stock is moving lower simply if it broke below the $34 support level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break below the key $34 level.

The Tale of the Tape: After embarking on a year-long uptrend, CMCSK seems to be forming a head & shoulders pattern. Although a trader could go long at $34 expecting a bounce, the stock’s pattern implies an eventual breakdown. If that happens, a short trade should be entered on a break of the $34 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