Youku Tudou Inc (NYSE: YOKU)

Youku Tudou Inc. operates as an Internet television company in the People’s Republic of China. Its Internet television platform enables users to search, view, and share video content across various devices. The company’s services for users comprise online video content library consisting primarily of professionally produced content, including television serial dramas, movies, current event reports, variety shows, and music videos. It also provides guided user-generated content through Youku Paike and Youku Niuren programs; and produces a range of content, such as sponsored Web serial dramas, reality shows, interviews, and variety shows under the Youku Originals brand, as well as on Tudou platform.

Take a look at the 1-year chart of Youku (NYSE: YOKU) below with added notations:

1-year chart of Youku (NYSE: YOKU)

YOKU skyrocketed back in the spring, but after a persistent selloff in June, July and August, the stock started trading sideways over the past month. While in the sideways move, the stock has formed a key pair of price levels that are worth watching. YOKU has a current resistance at $18 (red), which has been both prior support and resistance earlier in the year, and a $16 support (green) that has also been both support and resistance in the past. At some point one of those levels will have to break.

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The Tale of the Tape: YOKU is trading inside a trading range. The possible long positions on the stock would be either on a pullback to $16 or on a breakout above $18. The ideal short opportunity would be on a break below $16.

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