iDreamSky Technology Ltd (NASDAQ: DSKY)

iDreamSky Technology Limited, through its subsidiaries, licenses and operates single player mobile games and mobile online games in the People’s Republic of China. The company operates casual games, such as Temple Run and Subway Surfers endless running games; Three Kingdoms of Fruits, a role-playing game; and Fruit Ninja, a reflex game, as well as racing, shooting, puzzle, and other genres of the game. It also licenses and operates mid- and hardcore mobile games, including Fire over Sky and Three Swordsmen role-playing games; and Story of Beauty, a card game, as well as action role-playing games, strategy games, and action fighting games. The company distributes games through in-game cross promotions, self-operated iDreamSky Game Center, and uu.cc Website, as well as through its proprietary distribution channels and third-party channels, such as app stores and device pre-installations.

Take a look at the 1-year chart of iDreamSky (NASDAQ: DSKY) below with the added notations:

1-year chart of iDreamSky (NASDAQ: DSKY)

After DSKY broke its $15 support (red) in January the stock fell all the way down to $7. From there DSKY has rallied over 100 percent, while also forming a key level at $12 (green). With the stock sandwiched in between those levels DSKY should provide a solid trading opportunity one way or another.

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The Tale of the Tape: DSKY has a key levels at $12 and $15. A trader could enter a long position on either a pullback to $12, or a break above $15, with a stop placed under the level of entry. However, if the stock were to break back below $12, a short trade could be made 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!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach