Etsy, Inc. (ETSY) engages in the operation of an online marketplace. It offers handmade products such as shoes, clothing, bags, and accessories.
Take a look at the 1-year chart of Etsy (NASDAQ: ETSY) below with my added notations:
In the past couple of months, a symmetrical triangle pattern has formed in ETSY’s chart. A down trending resistance combined with an up-trending support forms the triangle pattern (red).
Since there is no way to know which way the stock will break, traders wait for the breakout or breakdown before entering a trade. ETSY broke the support on Friday. A trader could enter a short position now, or on a rally back to the breakdown line, with a stop placed above the level of entry.
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