Avon Products, Inc. manufactures and markets beauty and related products worldwide. It offers beauty products, such as skincare, and personal care products, as well as fragrances and color cosmetics; and fashion and home products consisting of jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children’s products, and nutritional products. The company markets its products through direct selling and independent representatives.
Take a look at the 1-year chart of Avon (NYSE: AVP) below with the added notations:
AVP has been declining persistently over the course of the past year. In addition, the $7 price level (red) has become very important to the stock starting from the beginning of 2015. Not only was $7 a key support back in January and March, but that level has also been resistance once AVP fell below it.
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The Tale of the Tape: AVP has a key level at $7. A trader could enter a long position on a break above $7 with a stop placed under the level. However, if traders are bearish on the stock, a short trade could be made instead at the $7 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