SouFun Holdings Ltd (NYSE: SFUN)

SouFun Holdings Limited operates a real estate Internet portal, and a home furnishing and improvement Website in the People’s Republic of China. The company offers marketing services on its Websites, primarily through advertisements, to real estate developers in the marketing phase of new property developments, as well as to real estate agencies; and suppliers of home furnishing and improvement, and other home-related products and services. It also provides basic listing services that enable customers to post information of their products and services on Websites, and special listing services, which offer customized marketing programs involving online listings and offline themed events to real estate agents, brokers, developers, and property owners and managers; and suppliers of home furnishing and improvement and other home-related products and services.

To review potential trading opportunities with SouFun’s stock, please take a look at the 1-year chart of SFUN (SouFun Holdings Limited) below with my added notations:

1-year chart of SFUN (SouFun Holdings Limited)

SFUN may be forming a bearish chart pattern known as a double top. Double tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T).

SFUN appears to have formed a double top price pattern (red) from December of last year until this week. As with any price pattern, a confirmation of the pattern is needed. SFUN would confirm its pattern by breaking the $70 support (green) that was created by the double top pattern.

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The Tale of the Tape: SFUN has formed a potential double top. A short trade could be made on a break of the $70 level. Since there is no guarantee of a breakdown, a long trade could be made at $70 if a trader is willing to disregard the pattern.

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