Bitauto Holdings Limited provides Internet content and marketing services for the automotive industry primarily in the People’s Republic of China. The company operates in four segments: bitauto.com Advertising Business, EP Platform Business, taoche.com Business, and Digital Marketing Solutions Business. The company also distributes its dealer customers’ automobile pricing and promotional information through its partner Websites, including portals operated by Tencent, Netease, and Qihoo 360, as well as social networking Websites and Internet video Websites. In addition, it provides customer services and training to dealer customers.
Take a look at the 1-year chart of Bitauto (NYSE: BITA) with added notations:
BITA has been moving higher throughout most of 2014. However, the majority of the stock’s run has come over the most recent 6-7 months. During that time, the stock has formed a trendline of support (blue) that it has been bouncing on top of.
Always remember that any (2) points can start a trendline, but it’s the 3rd test and beyond that confirm its importance. BITA’s trendline seems to be important now that it has been tested 3 separate times.
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The Tale of the Tape: BITA has created a 6-month trendline of support. A long position could be entered on a pullback to that trendline, which is currently sitting right around $75, with a stop placed below that level. A short position could be entered if the stock were to break the trend line 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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach