Wright Medical Group, Inc., a specialty orthopaedic company, provides extremity and biologic solutions that enable clinicians to alleviate pain and restore their patients lifestyles. The company offers products that are used primarily in foot and ankle repair, upper extremity products, and biologics products. Its extremity hardware products comprise implants and other devices to replace or reconstruct injured or diseased joints and bones of the foot, ankle, hand, wrist, fingers, toes, elbow, and shoulder. The company also provides biologic products, which are used to replace damaged or disease bone, stimulate bone growth, and provide other biological solutions for surgeons and their patients, as well as offers a bone graft product incorporating antibiotic delivery. Its biological products focus on supporting biological musculoskeletal repair by utilizing synthetic and human tissue-based materials.
Take a look at the 1-year chart of Wright (Nasdaq: WMGI) below with my added notations:
Over the last 4 months the WMGI seems to have formed an inverse head and shoulders pattern (blue). I have noted the head (H) and the shoulders (s) to make the pattern more visible. The stock’s neckline resistance is at the $32.50 level (red). WMGI would confirm its H&S by breaking through the neckline.
Lastly, keep in mind that simple is usually better. Had I never pointed out this inverse H&S pattern, one would still think this stock was moving higher simply if it broke through the $32.50 resistance level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break above the key $32.50 level.
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The Tale of the Tape: WMGI has formed an inverse head & shoulders pattern. A long trade could be entered on a break through the $32.50 level, preferably on an increase in volume.
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
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