Lemonade Inc. (LMND) Breaks Below a Support Level

Lemonade Inc. is an insurance holding company, which engages in the provision of home and renters insurance services. The firm also acts as an insurance agent that offers underwriting and claims services through its subsidiary…

Take a look at the 1-year chart of Lemonade (NYSE: LMND) below with added notations:

Chart of LMND provided by TradingView

During the past two months, LMND had formed, and held, a very important level of support at $140 (red). Yesterday saw the stock break below that support. Not only does that imply lower prices for LMND, but the $140 area may act as resistance on any future rallies.

A trader could enter a short position on any rallies up to or near $140 with a stop placed above the level. If the stock were to break back above the $140 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