Universal Insurance Holdings, Inc., through its subsidiaries, provides various property and casualty insurance products. The company primarily underwrites homeowner’s insurance products; and offers reinsurance intermediary services. It offers its products through a network of independent agents in Florida, Delaware, Georgia, Hawaii, Indiana, Maryland, Massachusetts, Minnesota, North Carolina, Pennsylvania, and South Carolina, the United States.
Take a look at the 1-year chart of Universal (NYSE: UVE) below with my added notations:
After its vicious drop in November, UVE started to trade somewhat sideways over the following several months. During that stretch, the stock has had a tendency of creating support and resistance levels at the increments of $2 (blue). Even now the most recent level of support has been $18 several times this month.
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The Tale of the Tape: UVE tends to react to each $2 level. A long trade could be made on a break through $20, or on a pullback to $18, with a stop placed under the level of entry. A short trade could be made on a break below $18.
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