When it comes to our trading strategy of simple trading, Boston Scientific (BSX), is setting us up for another straight forward play. When looking for trades it’s important to realize they can’t all be this cut and dry, however, when you do fund setups that are, they require extra attention.
Such is the case on BSX. Looking at the chart, we can see one major level of support around the 50 mark. It would almost appear this is another head and shoulders setup, but the fact that we have to say “almost” negates it entirely. Why? Well, if you have to second guess, the rest of the market likely has to as well and by that time has probably written it off as not being one.
In any case, this level of support is a big one and creates one of those scenarios where you can play this stock either way. First, if the stock fails to hold 50, it’s reasonable to assume that lower prices are incoming. On the other hand, if the stock manages to hold this level, a bounce back up toward 54, or a previous level of resistance could be in the cards.
This is a scenario where you must be patient in order to catch the correct move. Price is the ultimate indicator and will tell us just where the play is to be made. We have the key level to pay attention to, now we just need to gauge price action at this level in order to see where participants step in to take the stock.
A doji candle is often a clear sign of reversal as buyers and sellers fight for an equilibrium. If this were to happen at this level, a bounce may be taking place. If price was to flush through this level without much resistance, look out below. Another thing to help with determination of which trade to take would be the overall market.
Is the market showing weakness? Or is it back to pushing higher? It is also important to note that on many of the key tickers, as well as SPY and QQQ, we are also at key levels that could lead to a stronger push higher. These are all factors you’ll want to consider when placing your next trade.
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Christian Tharp, CMT
This post was originally published on Wealthpop