Dynegy Inc., through its subsidiaries, produces and sells electric energy, capacity, and ancillary services in the United States. It operates in three segments, Coal, IPH, and Gas. The company sells its services on a wholesale basis from its power generation facilities. It has a fleet of 35 power plants in 8 states totaling approximately 26,000 megawatts of generating capacity.
Take a look at the 1-year chart of Dynegy (NYSE: DYN) with the added notations:
Over the course of the past two months, DYN has tested the $12 level (green) as support on multiple occasions. Even though the stock had dipped below that level on the most recent tests, DYN had always held the $12 level. However, yesterday the $12 level broke, and now the stock should be taking another leg down.
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The Tale of the Tape: DYN broke a key level of support at $12. A trader could enter a short position on any rallies up to or near $12 with a stop placed above the level. If the stock were to break back above the $12 level, a long position might be entered instead.
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