Covanta Holding (CVA) Drops Back Down

Covanta Holding Corp. engages in the operation and ownership of infrastructure for the conversion of waste to energy, related waste transport and disposal, and other renewable energy production businesses.

Take a look at the 1-year chart of Covanta (NYSE: CVA) below with added notations…

CVA has rallied strongly up into a sideways trading range. While in the range, the stock has formed a resistance level at $15.50 (red), and a level of support at around $13 (green).  CVA has pulled back from its recent high, but at some point, the stock will have to either break the resistance or the support.

The possible long positions on the stock would be either on a pullback to $13 or on a breakout above $15.50. The ideal short opportunity would be on a break below $13.

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