Microsemi Corporation (NasdaqGS: MSCC)

Microsemi Corporation designs, manufactures, and markets analog and mixed-signal semiconductor solutions in the United States, Europe, and Asia. The company offers radio frequency (RF) and power components, analog and RF integrated circuits, system-on-chip solutions, field programmable gate arrays, application-specific integrated circuits, power management products, timing and synchronization devices and precise time solutions, chip scale atomic clocks, voice processing devices, discrete components, security technologies, and scalable anti-tamper products. It also provides subsystems and modules that include application-specific power modules, and power-over-ethernet and midspans. The company distributes its product directly, as well as through electronic component distributors and independent sales representatives.

Take a look at the 1-year chart of Microsemi (NASDAQ: MSCC) with the added notations:

MSCC

MSCC may be forming a bearish chart pattern known as a double top. Double tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T).

MSCC appears to have formed the double top price pattern (blue) over the last 4 months. As with any price pattern, a confirmation of the pattern is needed. MSCC would confirm its pattern by breaking the $32 support (green) that was created by the double top pattern.

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The Tale of the Tape: MSCC has formed a potential double top. A short trade could be made on a break of the $32 level. Since there is no guarantee of a breakdown, a long trade could be made at $32 if a trader is willing to disregard the pattern.

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