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. The company operates through four segments: Company Stores, Domestic Franchise, International Franchise, and KK Supply Chain. It owns and franchises Krispy Kreme stores. As of May, 2014, the company had approximately 800 stores in approximately 20 countries in North America, Latin America, Asia/Pacific, the Middle East, and Europe.

Take a look at the 1-year chart of Krispy Kreme (NYSE: KKD) with the added notations:

1-year chart of Krispy Kreme (NYSE: KKD)

KKD has been declining since November of last year. Starting in February the stock had found a repeated area of support at $16 (blue). KKD finally broke that support back in the beginning of July, and then rested it as resistance several times thereafter. The stock should be moving overall lower from here.

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The Tale of the Tape: KKD had a key level of support at $16. Now that the stock has broken support, a trader might want to enter a short trade at or near the $16 level with a stop placed above that level. A break back above $16 could negate the forecast for a move lower.

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