YY Inc., through its subsidiaries, operates an online social platform in the People’s Republic of China. It provides YY Client, a personal computer based user software that offers real-time access to user-created online social activities groups. The company also offers Web-based YY that enables users to conduct real-time interactions on the Web without any downloads or installations; and Mobile YY, a smart phone application. In addition, it operates Duowan.com, a game media Website that provides information on online games and other resources for users and online game players. The company was founded in 2005 and is based in Guangzhou, the People’s Republic of China.
To review YY’s stock, please take a look at the 8-month chart of YY (YY, Inc.) below with my added notations:
Notice the rising wedge I have outlined on the chart of YY. A rising wedge price pattern is essentially a type of triangle formation in which the stock (YY) has formed an up trending resistance line (red) and an up-trending support level (green). These two trend lines converging on one another combine to form a rising wedge, which is usually a terminal pattern. Confirmation of this pattern would occur if the stock broke the up-trending support, which appears to be at around $50.
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The Tale of the Tape: YY has created a rising wedge pattern, which should lead to a break lower. A short trade could be entered on a break out of the bottom of the wedge, which currently sits near $50. If a trader believes the stock has higher prices in it’s future, a long play could be made at that support with a stop placed below 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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach