
YRC Worldwide Charts: Proceed With Caution
By L.A. Little of tatoday.com, author of Trade Like the Little Guy.
YRC Worldwide
(YRCW) - Get Report
faces a very uncertain future and that's reflected in the stock price. For anyone considering buying the stock of this trucking company, the risk is quite great and you must exhibit extreme patience in making a purchase.
To take a trade, everything needs to line up before you put your money on the line. What are those required pieces and how must they align to make the risk worthwhile? Let's look at the charts to see.
The long-term time frame has little to no impact for a trade in YRCW since the trade will almost certainly be a trade rather than a long-term holding.
The weekly chart represents the intermediate-term time frame. It gives us the parameters for a trade in terms of risk and reward.
As you can see, there's a problem and a cause for hope. The problem is that there was volume at the low print on this time frame. That probably means that the low will get a retest at some point. It's not necessary, but probable. The converse is there was volume on the next bar which wants to be retested at some point as well. The result is that you have your risk and reward parameters for a trade -- a high volume low at 62 cents and some good volume on that high bar of $1.18. That is almost a 100% move, high to low.
Zooming into the short-term time frame to see where the trade could set up, the first thing that you must notice is the high volume bar which represents a sign of strength.
That is probably the only reason one should even consider a possible trade in YRCW because the trend and the general look of the charts are negative.
As for what needs to happen to make a trade possible, either one of two events has to occur. The first case is to see prices trade back to the lows and to retest. If that was to occur on lighter volume and prices closed higher on the retest, then you could buy the stock. In doing so, you would turn around and place a stop just under whatever lows were generated on the retest. That's a lower-risk, scalp-type trade. The real risk is overnight risk which, in a stock like this, could bite you at most any time.
The other situation is to get a test of the highlighted resistance zone. What you would be looking for there is for volume to expand greatly as the "sign of strength" bar is surpassed and the resistance zone attacked. The low-risk trade there is to buy the retrace back into the bar or, if prices break through the resistance area, to buy on a fade back into that area. In both cases, you use the "sign of strength" bar as support.
The ideal case would be to see both events occur. You would want the retest of the lows first and then eventually the break topside. That is the only case in which this might turn into an investment rather than a trade. A break over resistance after a successful test of the lows accompanied by volume expansion would tell you that big money has decided that it can and should move into the stock. Big money's participation would turn a quick scalp trade into a more lasting, and probably rewarding, trade.
Those are the parameters as I see them in the current chart patterns. If you are determined to make a trade here, be patient and wait for the right setup, otherwise it's a crapshoot and you might as well venture into the real casinos for that kind of action.
Until next time, keep trading the charts!
At the time of publication, Little had no positions in the stock mentioned, though positions can change at any time.
L.A. Little, author, professional trader and money manager, writes daily on
www.tatoday.com
, a free educational site for traders and investors. He has been featured in numerous publications and is the author of
.
His background includes degrees in philosophy, computer science, computer information systems and telecommunications. With a trading philosophy centered on capital protection first and the accumulation of consistent gains over time, L.A. espouses a simplistic technical approach to trading the markets that is a throwback to the days of past. With a focus on swing points and the qualification of trends, L.A. provides a breath of fresh air to an otherwise crowded room of derivative indicators with the emphasis on technical minutiae.









