Breakdown Coming for Confluent (CFLT)?

Confluent, Inc. designs and develops a real-time data platform for organizations. It offers confluent platform, KSQL and Confluent hub products. The firm provides application architecture engagement, multi data center, security and upgrade engagement and Amazon web services cloud deployment services. 

Take a look at the 1-year chart of Confluent (NASDAQ: CFLT) below with the added notations...

Chart of CFLT provided by TradingView

Over the past five months, CFLT has created a key level of support at the $58 (blue) mark. That line would also be the “neckline” for the stock’s possible head and shoulders (H&S) reversal pattern. Above the neckline you can see the H&S pattern (red) has been completed. 

Confirmation of the H&S would occur if CFLT were to break the support, and lower prices would be expected from there.

The Tale of the Tape: CFLT has formed a head & shoulders pattern. A long trade could be made at $58 with a stop placed below that level, but the bearish pattern implies a short trade to be entered on a break below that level 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 

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