BlackRock Kelso Capital Corporation is an externally managed, non-diversified closed-end management investment company. The company’s investment objective is to generate both current income and capital appreciation through its debt and equity investments. It invests primarily in middle-market companies and target investments throughout the capital structure. The term middle-market refers to companies with annual revenues typically between $50 million and $1 billion. Its targeted investment typically ranges between $10 million and $50 million. The company seeks to invest in companies that operate in a variety of industries and that generate positive cash flows. It provides middle-market companies with flexible financing solutions, including senior and junior secured, unsecured and subordinated debt securities and loans, and equity securities.
Before discussing the potential trading opportunities with BKCC (BlackRock Kelso Capital Corporation), please review the 1 yr. chart of BKCC that I have outlined below, with my added notations:
Over the last 4 months, BKCC has created (2) very important price levels in which to trade off of: First, the $9 resistance (navy), which was also previous support (blue). Second, the $8 level has been both support (green) and resistance (red) several times since August. BKCC is currently trading in between those (2) levels.
The Tale of the Tape: BKCC is trading between (2) important price levels at $9 and $8. A rise to the $9 resistance would be a great opportunity to enter a short trade, while a break above that $9 could be a nice long trade. A trader could also enter a long trade on a pull back down to the $8 support, or a short trade on a break below the $8.
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