iRobot Corporation (NASDAQ: IRBT)

iRobot Corporation designs, builds, and sells robots for the consumer market worldwide. It offers Roomba floor vacuuming robots; Braava family of automatic floor mopping robots; Mirra Pool Cleaning Robot to clean residential pools and removes debris as small as two microns from pool floors, walls, and stair; and Looj Gutter Cleaning Robot.

Take a look at the 1-year chart of iRobot (NASDAQ: IRBT) with the added notations:

1-year chart of iRobot (NASDAQ: IRBT)

Back in October and December, IRBT had formed a key level of support at $63 (red), and last week saw the stock break below that support. Not only should this mean lower prices for IRBT, but the $63 level will most likely act as resistance on future rallies.

The Tale of the Tape: IRBT broke a key level of support at $63. A trader could enter a short position on any rallies up to or near $63 with a stop placed above the level. If the stock were to break back above the $63 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!

Good luck!

Christian Tharp, CMT