A stock to keep on the radar today is CSTR (Coinstar, Inc.) Coinstar is a provider of automated retail solutions and one of its core offerings in automated retail include its DVD business, where consumers can rent or purchase movies from self-service kiosks. Another key part of Coinstar’s business is its Coin business, where consumers can convert their coin to cash or stored value products at coin-counting, self-servicing kiosks. As of year end 2010, Coinstar had approximately 30,200 DVD kiosks in 26,100 locations and 18,900 coin-counting kiosks in 18,700 locations such as supermarkets, drug stores, mass merchants, financial institutions, convenience stores, and restaurants.
Before discussing the potential trading opportunities with CSTR, please review the 1 yr. chart of CSTR that I have outlined below, with my added notations:
CSTR has formed a very important level over the last 8 months at $55. As you can see, that level has been tested several times as both support (green) and resistance (red). After moving back above the $55 level in early July, CSTR has been holding support at that level and should be poised to move higher. Also, a lower level worth watching on a break below $55 would be $55 (light blue).
Depending on when a trader might enter a trade, caution should be advised since CSTR has an earning release on July 28th.
The Tale of the Tape: CSTR has recently broken above a key area of resistance at $55 and is now holding that level as support. A long position could be entered now at $55 with a stop below $55. However, if CSTR were to break back below $55, either now or once their earnings report is released, the next level down for a potential long entry would be $50.
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