Select Comfort Corp. (NASDAQ: SCSS)

Select Comfort Corporation, together with its subsidiaries, provides sleep solutions and services in the United States. It designs, manufactures, markets, retails, and services beds and bedding accessories, such as mattresses, adjustable bases, pillows, sheets, and other bedding products under the Sleep Number brand. The company sells its products through retail, direct marketing, and e-commerce channels, as well as directly to consumers.

Take a look at the 1-year chart of Select (NASDAQ: SCSS) below with the added notations:

1-year chart of Select (NASDAQ: SCSS)

With the exception of the August rally, SCSS has been trading overall sideways for most of the past year. During that time, you will see that the level of $20 (blue) has commonly appeared as either support or resistance. January has seen the stock come back down to that $20 level again, and yesterday SCSS bounced off of it.

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The Tale of the Tape: SCSS has a key level at $20. A trader could enter a long position on a pullback down to that level with a stop placed under it. However, if traders are bearish on the stock, a short trade could be made instead on a break back below $20.

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