Signet Jewelers Ltd. (NYSE: SIG)

Signet Jewelers Limited engages in the retail sale of jewelry and watches in the United States, the United Kingdom, the Republic of Ireland, and the Channel Islands. Its Sterling Jewelers division operates stores in malls and off-mall locations under the Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry, Jared VaultTM, Jared Jewelry BoutiqueTM, Jared Vivid, JB Robinson Jewelers, Marks & Morgan Jewelers, Every kiss begins with Kay, He went to Jared, Celebrate Life. Express Love., the Leo Diamond, Hearts Desire, Artistry Diamonds, Charmed Memories, Diamonds in Rhythm, and Open Hearts by Jane Seymour names.

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

1-year chart of Signet (NYSE: SIG)

SIG has been trending lower for the past 4 months, and most recently the stock has started another rally. Since August, the $115 price level (blue) has become very important to the stock. You will notice on the chart that $115 was a key support in August and December, and then that level became resistance in the beginning of March. Now that SIG is back above that level, it should act as support again.

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The Tale of the Tape: SIG has a key level at $115. A trader could enter a long position on a pullback to $115 with a stop placed under the level. However, if traders are bearish on the stock, a short trade could be made instead on a break of the $115 support.

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