The stock has been in a downtrend since March. It bounced around between a downtrending resistance and support line until 11/2 when it broke down below the support line. It has now come back up to the old support line, which is now acting as resistance, and bounced down off of it, with confirmation from the MACD and stochastics. It also did a semi-bounce in mid-November, but it never made it all the way to the line, and the MACD and stochastics did not give a clear signal either. This time it is a very clear buy signal.
The stock is currently at $33.72. However, I bought my put earlier in the day when the stock was around $34.70, so my put is already about $75 profitable. Resistance is currently at around $36.15 and support is around $30.25. The support level I have drawn in is connecting the lows from last July and 2 weeks ago. I don’t think it’s a very strong support level, but it still provides a good reason to get out of the trade.
My exit orders are:
- Market order to exit if the stock trades above $37.25.
- Trailing stop loss if the stock trades below $31.25.
- Stop loss on the option at $3.00
