Last up this week is toy maker Mattel (MAT), a stock that didn't win any new friends when it posted negative earnings surprise at the start of this week. But even though MAT missed Wall Street's profit estimates, shares are looking bullish right now.
While earnings did gap shares down below their 50-day moving average, the move wasn't technically significant. The 50-day hadn't been acting as any sort of important support level, and the gap down didn't send shares below the trend line support level that has acted as critical support since the start of August. Instead, it send MAT to test that level -- and reaffirm that shares can still catch a bid at support.
When a stock is trending higher in a channel, as Mattel is, the ideal time to buy comes when shares hit trend line support, then bounce higher. That bounce tells us that support is still in play, a factor that dramatically limits the risk of being a buyer. If the trade does move against you, you'll know quick enough to get out with minimal damage to your capital.With Mattel bouncing right now, it makes sense to be a buyer here. Keep a protective stop just under support; if shares fall below that level, the pattern is broken. I also featured Mattel recently in "7 Hot Stocks on Traders' Radars." To see this week's trades in action, check out the High Volume Technicals portfolio on Stockpickr. -- Written by Jonas Elmerraji in Baltimore.
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