Wayfair Inc. engages in the e-commerce business in the United States. It offers approximately seven million home products under various brands. The company’s brands include Wayfair.com that focuses on offering home furnishings and décor from low-to high-end and across various styles; Joss & Main, an online flash sales site; AllModern, an online destination for original design for modern home enthusiasts; DwellStudio, an online design studio for modern, fashion-forward home furnishings; and Birch Lane, a destination for classic style home designs. Wayfair Inc. also sells its products through retail partners.
Take a look at the 1-year chart of Wayfair (NYSE: W) below with the added notations:
W has been trading in the same general area over the past 6 months. During that time, the $40 price level (blue) has become very important to the stock. Not only was the $40 level a resistance area back in July, August and October, but that level was also support in October and November once W got above it. Yesterday, the $40 level was hit as resistance, yet again.
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The Tale of the Tape: W has a key level at $40. A trader could enter a long position on a break above $40 with a stop placed under the level. However, if traders are bearish on the stock, a short trade could be made instead at the $40 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