Technical Lesson: Snap-On (SNA)
There are times when the direction of the chart can have more influence on share price than fundamentals. I think it was the case with Snap-on (SNA) Tools; it barely missed on revenue, but it was slammed nonetheless.
I got a few questions about SNA stock on Twitter and made a few observations, which led Richard to tweet:
Replying to @cvpayne
@sappcms: What are you guys talking about? Can you break it down for a simpleton like me? "series of lower lows", "probably reversal," etc.?
Down Channel: Stocks often form channels with distinctive resistance and support points. In the case of SNA, the stock continues to make lower highs and lower lows – hence, a down channel.
Support: In this case, if $150 doesn’t hold, we would probably see a re-test of the 52-week low, which would take the stock to $145.00 a share.
Buy Points: A reverse on the chart happens when the stock bounces off the bottom of the channel (trading bounce). However, it also happens with conviction when the stock breaks through the top of the channel and closes there. This is especially a buy signal; it happens with better than expected volume.
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