MercadoLibre, Inc. hosts online commerce platforms in Latin America. It offers MercadoLibre Marketplace, an automated online e-commerce service for businesses and individuals to list items and conduct their sales and purchases online in a fixed-price or auction-based format. The company’s MercadoLibre marketplace enables commerce through online classifieds for motor vehicles, vessels, aircraft, services, and real estate; and Internet users to browse through various products that are listed on its Website and to register with MercadoLibre to list, bid for, and purchase items and services.
Take a look at the 1-year chart of Mercado (NASDAQ: MELI) with the added notations:
After trending higher for most of the year, MELI started a decline that ended up with the stock bouncing on top of the $150 support (green) several times over the past 2 months. Now that the stock has fallen back down to that support area again, traders would be able to expect some sort of bounce, which did occur yesterday. However, if the $150 support level breaks, lower prices should follow.
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The Tale of the Tape: MELI has a key area of support at $150. A trader could enter a long position at $150 with a stop placed under the level. If the stock were to break below the support a short position could 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