Magna International Inc. designs, develops, and manufactures automotive systems, assemblies, modules, and components in North America, Europe, Asia, and South America. The company offers engineering and contract manufacturing services, and fuel systems; electric/electronic components and systems; roof systems comprising softtops, retractable hardtops, modular tops, and hardtops; and closures, including latching systems, hinges and wire forming, power closures, electronics, door modules, window systems engineered glass, sealing, trim and roof racks, roof systems, testing centers, and running boards.
Take a look at the 1-year chart of Magna (NYSE: MGA) with the added notations:
MGA has held a key level of support at $42 (green) for the past 4 months. Now that the stock has fallen back down to that support area again, traders probably could have expected yesterday’s bounce. However, if that $42 support level breaks, lower prices should follow.
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The Tale of the Tape: MGA has a key area of support at $42. A trader could enter a long position near $42 with a stop placed under the level. If the stock were to break below that support a short position could 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!
Christian Tharp, CMT
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