Shutterstock, Inc. operates as an online marketplace for commercial digital content imagery. It offers various photographs covering a range of subjects, including animals/wildlife, the arts, backgrounds/textures, beauty/fashion, buildings/landmarks, business/finance, celebrities, education, food/drink, healthcare/medical, holidays, nature, objects, people, religion, science, sports/recreation, technology, transportation; illustrations and vector art; curated premium imagery; and video footage for users engaged in video advertisements, commercial motion pictures, television programming, video games, interactive applications, and other video-based media.
Take a look at the 1-year chart of Shutterstock (NYSE: SSTK) below with added notations:
SSTK broke its $55 level of support back in July and the stock has been declining ever since. However, over the past two months the stock has fallen into a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.
SSTK’s rectangle pattern had formed a $35 resistance (blue) and a $29 support (red). At some point the stock had to break one of those two levels, and last week SSTK broke the $29 support.
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The Tale of the Tape: SSTK broke down from its rectangle pattern. The ideal short opportunity would be on a rally up to or near the prior $29 support. A break back above $29 could negate the forecast for a move higher.
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