Tempur Sealy International, Inc. develops, manufactures, markets, and distributes bedding products in North America and internationally. The company provides mattresses, foundations, adjustable bases, and other products, including pillows and other accessories. It offers its products under the TEMPUR, Tempur-Pedic, Sealy, Sealy Posturepedic, Optimum, and Stearns & Foster brand names. The company sells its products through furniture and bedding retailers, department stores, specialty retailers, and warehouse clubs; e-commerce platforms, company-owned stores, and call centers; and other third party distributors, and hospitality and healthcare customers.
Take a look at the 1-year chart of Sealy (NYSE: TPX) with the added notations:
TPX appears to have formed the double top price pattern (red) over the last 4 months. Double tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T).
As with any price pattern, a confirmation of the pattern is needed. TPX would confirm its pattern by breaking the $54 support (green) that was created by the double top pattern.
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The Tale of the Tape: TPX has formed a potential double top. A short trade could be made on a break of the $54 level. Since there is no guarantee of a breakdown, a long trade could be made at $54 if a trader is willing to disregard the pattern.
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