I said earlier that "as the market goes, so do its constituent stocks." The price action in Hanesbrands (HBI) is a perfect example of that. And you don't have to be an expert technical analyst to figure out what's going on in this stock.
Hanesbrands has been trading higher within a trend channel, bounded by a resistance range to the upside and trend line support to the downside. That price channel gives traders a high probability range for HBI's trading to remain within, a big advantage when trying to figure out what to do with this stock. The most important level to watch in HBI is trendline support; it's a level where HBI has been able to catch a bid and reverse on its last seven drops, and it's likely to remain an important downside barrier.
When you're looking to buy a stock within a trend channel, buying after a bounce off of support makes sense for two big reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). The 50-day moving average has been a good proxy for support over the course of the pattern; that's where I'd recommend putting a protective stop on this trade.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV