State Street Corporation (NYSE: STT)

State Street Corporation, a financial holding company, provides investment servicing and investment management services to institutional investors worldwide. The company’s investment servicing products and services include custody, deposit taking, product-and participant-level accounting, daily pricing and administration, master trust and master custody, record keeping, and cash management, as well as foreign exchange, brokerage, and other trading services. Its services also comprise securities finance, deposit and short term investment facilities, loan and lease financing, and investment manager and alternative investment manager operations outsourcing, as well as performance, risk, and compliance analytics to support institutional investors; and shareholder services, such as mutual fund and collective investment fund shareholder accounting. The company’s investment management products and services include investment management and advisory, investment research, and other financial services, including securities finance; strategies for managing passive and active financial assets, such as enhanced indexing for U.S. and global equities and fixed income securities; and exchange traded funds.

To review State’s stock, please take a look at the 6-month chart of STT (State Street Corporation) below with my added notations:

6-month chart of STT (State Street Corporation)

After breaking through the $60 resistance (blue) in May, STT has hit a recent high of $68. Over the last month the stock has been stuck within a common pattern known as a rectangle. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. STT’s rectangle pattern has formed a $68 resistance (red) and a $64 support (green). A break above $68 would also be a new 52-week high, while a break below $64 should mean a minimum fall to $60.

If I had to “guess”, I’d say that the volume increase as the stock recently sold off and decline while the stock has moved higher (pink) hints to a probable break lower. However, a break higher is a break higher regardless of volume.

The Tale of the Tape: STT has formed a rectangle pattern. The possible long positions on the stock would be either on a pullback to $64, or on a breakout above $68. The ideal short opportunity would be on a break below $64.

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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