500.com Ltd (NYSE: WBAI)

500.com Limited provides online sports lottery services in the People’s Republic of China. It operates as an aggregator and processor of lottery purchase orders from its registered user accounts. The company offers a suite of online lottery services, information, user tools, and virtual community venues. Its lottery sales services comprise individual lottery purchase, lottery pool purchase, automatic tag-along purchase, recurring purchase, and locked-in lottery number purchase services. The company provides its services through its mobile applications to mobile users, as well as through its online platform. As of December 31, 2013, it had 19.1 million registered user accounts.

Take a look at the 1-year chart of 500.com (NYSE: WBAI) below with my added notations:

1-year chart of 500.com (NYSE: WBAI)

WBAI had been on a steady decline starting from back in August, but now the stock seems to be trying to bottom out over the last few months. During the possible bottoming process, WBAI has created a resistance at $20 (blue), which is a level that had also been support back in December. A break above that $20 level should mean higher prices for the stock.

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The Tale of the Tape: WBAI has a key level of resistance at $20. A long trade could be entered on a break through that level. However, if you are bearish on the stock, a short trade could be made on any rallies 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