Analog Devices, Inc. (NASDAQ: ADI)

Analog Devices, Inc. is engaged in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits (ICs) for use in industrial, automotive, consumer, and communication markets worldwide. It offers signal-processing products that convert, condition, and process real-world phenomena, such as temperature, pressure, sound, light, speed, and motion into electrical signals. The company’s products include data converters, which translate real-world analog signals into digital data and translate digital data into analog signals; high-performance amplifiers to condition analog signals; and radio frequency ICs to support cellular infrastructure.

Take a look at the 1-year chart of Analog (Nasdaq: ADI) with the added notations:

1-year chart of Analog (Nasdaq: ADI)

ADI has been chopping its way higher for most of the year. However, the last 2 months for the stock have been rough ones. You will notice that the stock has even fallen back under the $50 level, and that level has always been key for ADI whenever the stock has been above or under it.

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The Tale of the Tape: ADI has a key level of resistance at $50. A short trade could be made on any rallies up to that $50 area with a stop placed above that level. A break back above $50 would negate the forecast for a lower move.

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