Pet product retailer PetSmart (PETM) has made an auspicious run in 2011. Shares have rallied nearly 13% this year, besting the broad market by a factor of two. Now it looks as if investors will get a shot at a low risk entry in PetSmart to kick off August.
That's because shares of PetSmart have been locked in an uptrending channel for the better part of the past year. That channel essentially keeps shares boxed in between parallel, uptrending resistance and support levels -- giving traders a good overview of the stock's high-probability price behavior. With shares approaching support this week, a buy near support could be a low-risk opportunity to get shares before they make their next thrust higher.
The key to buying this setup is to wait for shares to actually "bounce" off of support. That's because support levels do eventually fail, so we want to make sure that demand for shares at around $44 is confirmed before buying.Shorter-term traders can buy PETM in anticipation of a move to trend line resistance; longer-term traders should plan on holding the position until shares eventually break down below trend line support. PetSmart is one of TheStreet Ratings' top-rated specialty retail stocks.