Knowles Corporation designs, manufactures, and sells products and components to the mobile communications, consumer electronics, medical technology, telecommunications infrastructure, military, aerospace, and industrial markets worldwide. The Mobile Consumer Electronics segment designs and manufactures acoustic products, including microphones, speakers, receivers, and integrated modules for the handset, tablet, and other consumer electronic markets. The Specialty Components segment designs and manufactures electronic components used in medical and life science applications; and solutions and components used in communications infrastructure and various other markets.
Take a look at the 1-year chart of Sanderson (NYSE: KN) below with my added notations:
KN has formed a key support level at $18.00 (green) over the past 9 months. Although the stock has dipped below that level a few times, it always rallies back up to hold that mark. In addition, the stock is declining against a short-term, down trending resistance level (red). These two levels combined had KN stuck within a common chart pattern known as a descending triangle. Eventually, the stock will have to break one of those two levels.
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The Tale of the Tape: KN is sitting at its triangle support. A short trade could be made on a break of support or on a rally up to resistance. A long trade could be made at support or on a break through the triangle resistance.
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