Legg Mason Inc (NYSE: LM)

Legg Mason Inc. is a publicly owned asset management holding company. The firm through its subsidiaries provides investment management and related services to institutional and individual clients, company-sponsored mutual funds and other pooled investment vehicles. Legg Mason Inc. was founded in 1899 and is based in Baltimore, Maryland.

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

1-year chart of LM (Legg Mason, Inc.)

LM had a great run from its $30 low in June to its $49 peak in March. Two key levels that were created recently were $40 (blue) and $45 (black). Last week the first level of $45 broke and that should mean lower prices overall for the stock. The next stop on the way down should be the $40 level.

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The Tale of the Tape: LM’s pullback didn’t hold $45, thus should be moving lower. A short trade could be made on a rally back up to $45, while a break back above $45 would be an opportunity to get long the stock. If the stock continues lower, a long trade at $40 might be considered.

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