Waddell & Reed Financial, Inc., through its subsidiaries, provides investment management, investment product underwriting and distribution, and shareholder services administration to mutual funds, and institutional and separately managed accounts in the United States. The company acts as an investment adviser for institutional and other private investors, and provides sub advisory services to other investment companies; underwrites and distributes registered open-end mutual fund portfolios; and offers fee-based asset allocation investment advisory products to advisors channel customers. It also distributes business partners’ variable annuity products, and retirement and life insurance products to advisors channel customers; and sells life insurance and disability products underwritten by various carriers.
Take a look at the 1-year chart of Waddell (NYSE: WDR) below with the added notations:
WDR has been trending its way lower since its April peak. However, since bottoming near $42 in October, the stock seems to have stabilized and has been trading mostly sideways since. Over the last 4 months WDR has found resistance near the $50 level (blue) on two separate occasions, and that level was also a support area back in August. A break back above $50 should result in higher prices for the stock.
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The Tale of the Tape: WDR has a key level at $50. A trader could enter a long position on a break above $50 with a stop placed under the level. However, if traders are bearish on the stock, or the market overall, a short trade could be made at the $50 level instead.
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