SolarWinds Inc (NYSE: SWI)

SolarWinds, Inc. designs, develops, markets, sells, and supports enterprise-class information technology (IT) and infrastructure management software to IT professionals in various organizations worldwide. The company offers enterprise-class network management products, including SolarWinds Network Performance Monitor that monitors and analyzes network performance metrics for routers, switches, servers, and other simple network management protocol enabled devices; additional network management products for various network management issues; and SolarWinds Log and Event Manager, a server-based product that automates the collection and interpretation of logs from various sources.

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

1-year chart of SWI (SolarWinds, Inc.)

SWI appears to have been forming a base over the last several months. A couple of times over that period the stock hit a key resistance level at around $40 (blue). Earlier this week SWI finally broke up out of its base and above that important $40 level. The stock should be moving overall higher from here, and so far seems to have resisted the general $42.50 area as expected.

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The Tale of the Tape: SWI had a key level of resistance at $40 that should now act as support on any pullbacks. A long trade could be entered on a pullback to $40 with a stop placed below that level. A break back below $40 could negate the forecast for a move higher.

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

Follow me on Twitter: @cmtstockcoach