Office product retailer Staples (SPLS) is offering up a pretty straightforward pattern this week, as shares bounce higher within their trend channel. Staples has been locked in its channel since the end of August, when market volatility was skyrocketing and trading conditions were markedly different than they are now. In April, traders could be looking at an opportunity for an optimal entry in this stock.
You can think of Staples' trend channel like any other trading channel -- it's a range that's bounded on either side by a dynamic support and resistance level. Those two levels tell traders a great deal about the high-probability moves that Staples is likely to make.
Now, with this stock testing trend line support, it makes sense to buy on a bounce in hopes that SPLS will climb back up the channel.Waiting for the bounce is critical when you're trading stocks in a channel. Ultimately support and resistance levels do eventually fail, and you don't want to be left holding the bag if support can't hold up here for Staples. By waiting for the bounce, you get to see if there's still a glut of demand propping up share prices at support before you put your money on the line. Staples shows up on a recent list of 10 Stocks That Fidelity Funds Are Buying.
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