We highlighted Saks (SKS) earlier this month here http://steadytrader.wpengine.com/chart-of-the-day-saks-sks/

The narrowing trading range has so far resolved to the downside but for us still too early for a trade given the critical juncture of the overall market and especially the technical development in SKS itself.

On the chart below note how SKS fell out of the narrowing trading range, but also note the Doji candle from yesterday (Monday May 24) right at the 200 day m oving average.  What's more, the stock gapped down yesterday and then failed to follow through.  

What we are watching closely for here is a nicely green close today, which would get us into a long position immediately at the close.  

As usual, we look for positions where risk/reward is clearly defined.  In our setups that often means if one direction of the trade doesn't work out, a trade in the opposite direction is setting up very soon.  

In the case of SKS, if a bounce here at the 200 dma after a Doji daily bar doesn't hold then the stock should have a good bit further to fall.  Hence, if the 20 dma doesn't hold we would be inclined to go short.

Share Button