YY Inc (NASDAQ: YY)

YY Inc., through its subsidiaries, operates an online social platform in the People’s Republic of China. The company engages users in real-time online group activities through voice, video, and text on personal computers and mobile devices; and enables users to create and organize groups of various sizes to discover and participate in a range of activities, including online games, music activities, education, live game broadcasting, and conference calls. Its principal product is YY Client, which enables users to engage in live interactions online; and provides access to user-created online social activities groups. It also offers Web-based YY that enables users to conduct real-time interactions on the Web without any downloads or installations; and Mobile YY, a mobile application.

Take a look at the 1-year chart of YY (Nasdaq: YY) below with my added notations:

1-year chart of YY (NASDAQ: YY)

YY has been trending consistently higher for the last 4 months while forming a clear trendline of support (red). However, the stock had also formed at 52-week high resistance at $90 (blue). At some point YY was going to have to break one of those two levels, and late last week the stock broke to a new high.

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The Tale of the Tape: YY broke though its $90 resistance, which was also a new 52-week high. A long trade could be made on a pullback down to the $90 level with a stop placed below that level. A break back below $90 should lead to a fall down to the trendline support.

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