Timken Co (NYSE: TKR)

The Timken Company engineers, manufactures, and markets bearings, transmissions, gearboxes, belts, chains, couplings, and related products worldwide. It operates through two segments, Mobile Industries and Process Industries.

Take a look at the 1-year chart of Timken (NYSE: TKR) below with added notations:

1-year chart of Timken (NYSE: TKR)

From mid-January into April, TKR was moving in a sideways trading range. While in the range, the stock formed somewhat of a rectangle pattern. The pattern had a resistance at $46 (red), and a $42 support (green). TKR had broken out of the rectangle, but has now fallen back within it.

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The Tale of the Tape:: TKR is trading back within a prior rectangle pattern. The possible long positions on the stock would be either on a pullback to $42 or on a break back above $46. The ideal short opportunities would be on a break below $42, or on a rally up to $46.

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

Follow me on Twitter: @cmtstockcoach