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Three-dimensional printer manufacturer Stratasys (NASDAQ: SSYS) saw an explosive rally from October 2011 up to the recent highs in January. Thanks in part to recent media focus on the 3D printing industry, the stock has since endured a fairly volatile past two months, which have led to several compelling technical aspects on its chart.
The stock currently sits at a crossroads. If it slides below a key level, it would break support in multiple time frames and set up a juicy short-side swing trading opportunity.
At its 2009 lows, the stock was trading below $8. Fast forward to Jan. 22, and the stock hit an all-time high of $92.30 before slipping lower.
Rewinding a bit, we note that a stealth rally in the stock from 2009 through May 2011 catapulted SSYS to the $55 area, before giving back much of the gains within five short months. However, with the broader market lows in October 2011, SSYS quickly got back on its feet, ultimately setting the stock on its path to the January 2013 highs.
Before the final fireworks in Q4 2012 and early Q1 2013, the stock broke past key resistance in July 2012. In breakout 101 fashion, it retested this resistance as support in September, and finally let loose for the big rally into January.
On the daily chart below, note that by late February, SSYS had retraced much of the fourth-quarter rally and found support right at its longer-standing uptrend that dates back to September 2011. Traders not nimble enough to use simple moving averages as reference points rather than hard stop/target levels would have quickly been faked-out on the down move as the stock traded below its 200-day simple moving average for five days before rallying again.
This reflex rally stalled exactly where it should have, namely at the 61.8% Fibonacci retracement level of the Jan. 22 to Feb. 26 sell-off. Even more classically, this reflex rally stalled on April 11, as it bumped into said retracement level, and left a clear bearish shooting star candlestick behind on its daily chart.
The shooting star candle tells us buyers became exhausted that day, as they pushed the stock higher intraday, but by the end of the day, they had given up the entire intraday effort, and then some. Over the ensuing sessions, SSYS continued lower, further confirming the bearishness of the April 11 intraday action. When all was said and done, the reflex rally, coupled with the most recent drift lower, had formed a nice looking bear flag on the daily chart below.
With the stock currently trading just above $71, it is sitting near the bottom of the bear flag and also very close to its 200-day simple moving average.
A daily close below the $69 area could accelerate the stock downward. While SSYS may find some support at its 2011 uptrend, which currently comes in around $64 and change, there is no support in sight again until it nears the $60 mark. Should $60 fail, both lateral support and a 23.6% Fibonacci extension move point toward the low $50s.
Recommended Trade Setup:
-- Sell SSYS short at $69 or below-- Set stop-loss at $72-- Set initial target at $60 for a potential 13% gain in 3-7 weeks
Twenty years ago, one of my competitors complimented all the effort I was putting into my trades… and then told me I was doing it all wrong.
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