By Andrew Nyquist
On Friday, I initiated a one third sized trading position in VMware Inc (VMW). To be clear, this is a short-term trade (entry 1 of 3) with defined risk. The risks are clear with overbought market conditions and a lagging technology sector. That said, I initiated the trade due to price proximity to VMW technical support.
Here is a breakdown of the trade with VMW technical support levels:
1. The stock price action has produced lower highs and higher lows for the past 3 months. This coiling action means that a larger breakout or breakdown is coming
2. The near-term trend is up.
3. Strong VMW technical support resides between $92-$94. This area consists of a technical backtest, near term uptrend line, and 50 day moving average. $93 is also the 50% fibonacci retracement of the September high to October low. I plan to purchase another 2/3 position closer to $93 and preferably with a $92 handle (setting a mental stop just below). An expanded risk profile lens allows for VMW technical support down to $91, so I may adjust stop level depending on the price action.
Targets to the upside would include $96, $98, then a retest of the September highs ($100-$103). Since I viewing this with a short-term lens, I’m setting my sights on $96-$98.
Trade safe, trade disciplined.
VMware (VMW) Chart:
VMware (VMW) stock chart with trend lines and technical analysis. A closer look at VMW technical support and resistance levels.
Position in VMW at the time of publication.