The following company I will be analysing for a potential trade opportunity is Garmin (GRMN). The first thing I like to do is analyse the monthly chart to get a bigger picture of what the stock is doing overall and see how it’s trending.
What we can see is Garmin is now in a downtrend after it was in an uptrend for some time. There is a small retracement over the last few months and it’s trade currently at a significant level. I will highlight why this level is significant shorlty.
The weekly chart of Garmin is showing us that it’s in consolidation with the grey diamonds. The blue horizontal lines is a critical level of resistance which the stock has tested many times and is currenly trading at that level. The confirmed green arrow is a test bar. The volume on this bar was below average which caused the market to retrace back to the resistance point.
The daily chart shows us why we have that area of resistance and it’s due to the ultra high volume on the chart. That circled bar which shows that there was supply in the market, is now acting as a resistance level. The stock a few days ago having tested the resistance level with a VSA principle, No Demand and the stock has dropped since.
I am looking for a short trade now and what needs to happen is the following. The trend alignment on the daily chart needs to be down, it’s currently up. The weekl trend also needs to be down and it’s consolidating at the minute. With the monthly chart in a down trend, I am looking for trend alignment to the downside on all three timeframes. When we have trend alignment, then I will look for Signs of weakness for a short trade.
So which trading strategy will I use to trade this. Well you can look at purchasing a put options for a specified period. You have to outlay money for the trade and I deem this a more riskier trade. You may also look at short selling the stock but I am not in favour of that. Instead what I like to do is to receive income upfront from the markets and I will look at performing a bear call credit spread. This trade significantly reduces the risk of my trade and I also have protection.
So we’ll keep an eye out on this stock and if we get to trade it I will place it under the trade executed section.
Happy Trading.