Cirrus Logic, Inc., a fabless semiconductor company, develops analog and mixed-signal integrated circuits (ICs) for a range of consumer and industrial markets. The company offers audio products, including analog-to-digital converters (ADCs), digital-to-analog converters (DACs), codecs, digital interface ICs, volume controls, adaptive noise cancelling circuits, and amplifiers, as well as audio digital signal processors. Its audio products are used in various consumer applications comprising portable media players, smartphones, tablets, laptops, audio/video receivers, portable media players and speakers, home theater systems, set-top boxes, headsets and headphones, and digital camcorders and televisions.
Take a look at the 1-year chart of Cirrus (Nasdaq: CRUS) with the added notations:
Over the last year CRUS has been up, down, back up again, and since the beginning of June the stock has created a key level of support at $22 (green). The stock finally broke that support yesterday. The stock should be moving overall lower, at least down to the next level of $21 (red). A break of $21 most likely means a fall back down to $19 (blue).
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The Tale of the Tape: CRUS had a key level of support at $22. Now that the stock has broken support, a trader might want to enter a short trade at or near the $22, with a stop placed above the level of entry. A break back above $22 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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach