Spectrum Pharmaceuticals, Inc. develops and commercializes oncology and hematology drug products.
Take a look at the 1-year chart of Spectrum (NASDAQ: SPPI) with the added notations:
After the stock’s big jump back in October, SPPI has moved into a sideways trading range. While in the range, the stock has created a key level of support at $18, which should provide a floor on route to higher prices. However, if the $18 support level breaks, lower prices should follow instead.
The Tale of the Tape: SPPI has a key area of support at $18. A trader could enter a long position at $18 with a stop placed under the level. If the stock were to break below the 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