Dreamworks Animation SKG, Inc. (NASDAQ: DWA)

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DreamWorks Animation SKG, Inc. engages in the development, production, and exploitation of animated films and associated characters worldwide. It offers animated feature films and characters primarily for the theatrical, home entertainment, television, merchandising, and licensing markets. The company also provides television specials and series, live entertainment properties, online virtual worlds, and related consumer products. It has approximately 23 animated feature films, including Shrek the Third, Shrek 2, and Madagascar. The company has strategic alliances with McDonald’s, Hewlett-Packard, and Intel. DreamWorks Animation SKG, Inc. was founded in 1985 and is headquartered in Glendale, California.

Please take a look at the 1-year chart of DWA (DreamWorks Animation SKG, Inc.) below with my added notations:

1-year chart of DWA (DreamWorks Animation SKG, Inc.)

The trades here are pretty simple. DWA has been holding a very important level of support at $17 (blue) for almost the entire year. No matter what the market has or has not done over that period of time, DWA has not broken below that $17 support level. The stock approaching $17 should provide a bounce higher. However, if the overall market were to sell-off, DWA would most likely break that support and move lower from there.

The Tale of the Tape: DWA has a very strong level of support at $17. If the stock were to approach that level again, a trader could enter a long position with a stop placed under the level. If DWA 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