Tractor Supply Company: Perfect Setup For The Tween Trader
Dragonfly Capital | Dec 15, 2014 11:34PM ET
The stock market continues to confound. Starting the day higher then dropping. Rebound and then sell off again. What are you supposed to do? As a long term investor, nothing. You already have your protection in place. As a short term trader, stick to day trades, and quick ones. But if you are in between, a tweener, then I have 3 words for you: Tractor Supply Company.
The price of Tractor Supply (NASDAQ:TSCO) has been in a long uptrend until the 2014 pullback. The chart above shows the last 2 years but the trend started in January 2010. After the market bottomed in October Tractor Supply took off to the upside and then started a slow grind higher.
Despite this move and trend it is just getting interesting from technical perspective. As it recovers the December 2013 highs, it is stalling. There is resistance developing overhead at 79. A break of that resistance would trigger a target on a Measured Move to the 93 to 95 area. The momentum indicator RSI is in the bullish zone and supporting a move higher, and the MACD is rising.
But the price action is also starting to break down through the rising trend support. Should that continue a move back to the prior consolidation box is a reasonable target. The SMA’s are right there too.
This stock is set up perfectly for the in between trader. A break of resistance and you play it to the upside. A break of trend support and you play it to the downside. Or for about 6% of the stock price, just take both sides now with a January 77.50 Straddle. A Straddle is buying both a Put and a Call, so you can win on a move in either direction, as long as it moves more that the premium paid. When the stock does show its hand as to which direction it wants to move, close the opposite option to get some cash back and lower your break even move.
Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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