Cheetah Mobile Inc (NYSE: CMCM)

Cheetah Mobile Inc. operates a platform that offer mission critical applications for its users and global content distribution channels for its business partners in the People’s Republic of China. The company’s mission critical applications optimize Internet and mobile system performance and provide real time protection against known and unknown security threats. Its mission critical applications include Clean Master, a junk file cleaning, memory boosting, and privacy protection tool for mobile devices; Battery Doctor, a power optimization tool for mobile devices; Duba Anti-virus, an Internet security application for PC and mobile devices; Cheetah Browser, a safe Web browser for PCs and mobile devices; Photo Grid, an easy-to-use photo collage application that allows users to quickly create professional looking collages of photos through an intuitive interface for mobile devices; and Antutu Benchmark, a mobile hardware benchmarking application, which performs CPU, GPU, RAM, and I/O tests for Android devices.

Take a look at the 1-year chart of Cheetah (NYSE: CMCM) below with my added notations:

1-year chart of Cheetah (NYSE: CMCM)

After debuting around $14, CMCM embarked on a rally that took the stock to a high of around $30. At that time, the stock created an important level of support at $26 (red). Two weeks into September the stock broke that support and has been falling lower ever since. CMCM tried to bounce at both $24 and $20 on the way down (blue), but those $2 levels couldn’t hold and the stock is now approaching the key level to watch at $18 (green).

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The Tale of the Tape: CMCM is approaching its key level of $18. A long trade could be made at $18, or on a break back above $20. A short trade could be made on a break below $18 or on a rally up to $20.

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