SAP SE (NYSE: SAP)

SAP SE operates as an enterprise application software and database company worldwide. It offers SAP HANA and SAP S/4HANA, which are in-memory computing platforms that store and process huge data, and eliminate the maintenance of separate legacy systems and siloed data; SAP BW/4HANA, a data warehouse software; SAP S/4HANA Cloud, a software-as-a-service solution that provides the scalability, ease of management, and security; SAP SuccessFactors, a suite of human capital management solutions to develop, manage, engage, and empower the workforce; SAP Concur, a travel and expense management solution; SAP Ariba, a guided buying, light enablement, and open platform solution; and SAP Fieldglass, a solution to procure and manage external workforce.

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

1-year chart of SAP SE (NYSE: SAP)

Over the past two months, SAP has moved into a sideways trading range. While in the range, the stock has formed a common pattern known as a rectangle. The pattern has created a $117 resistance (red) and a $111 support (green). At some point the stock has to break one of the two levels.

The Tale of the Tape: SAP is trading in a rectangle pattern. The possible long positions on the stock would be on a pullback to $111 or on a break above $117. The ideal short opportunity would be on a break below $111.

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