Krispy Kreme Doughnuts (NYSE: KKD)

Krispy Kreme Doughnuts, Inc., together with its subsidiaries, operates as a branded retailer and wholesaler of doughnuts, beverages, and treats and packaged sweets worldwide. It owns and franchises Krispy Kreme stores. As of December 12, 2013, the company operated approximately 810 stores worldwide. It also produces doughnut mixes and doughnut-making equipment. The company was founded in 1937 and is headquartered in Winston-Salem, North Carolina.

Please take a look at the 1-year chart of KKD (Krispy Kreme Doughnuts, Inc.) below with my added notations:

1-year chart of KKD (Krispy Kreme Doughnuts, Inc.)

Other than a slight setback at the end of August, KKD had been flying high for most of last year. However, the stock had an even larger setback at the beginning of December.

A level that seems to stand out on the stock during the last eight months is $18 (blue). You can see how $18 has been both support and resistance since the end of May. In addition, the stock has also hit $20 as resistance on multiple occasions (red).

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The Tale of the Tape: KKD is stuck between key levels of $18 and $20. Traders could enter a long trade at $18, or on a break above $20. A short trade could be made on a break below $18 or on a rally up to $20.

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