Even though the S&P 500 is at key resistance on the weekly chart, "the trend is your friend until it ends." So I'll continue setting up the buy side on some of these stocks until I'm proven wrong -- and, for now, Fossil (FOSL) fits my parameters for a buy entry.
The larger pattern on the daily chart is a bullish, with a series of higher highs and lows. We are currently seeing a symmetrical pullback, meaning the move is similar in price to some of the prior larger corrective declines.
All the red lines on the chart represent 100% projections of prior declines. Over the years I have found that many corrective declines will be similar to other ones on the chart, so we can use this to time a buy entry with better odds of success. Fossil's price projections also overlap nicely with some other key Fibonacci price relationships. The two standout price support decisions come in between $119.49 and $121.54, and then between $116.57 and $118.37.
Besides the Fibonacci price clusters of support, I'm also seeing some timing cycles, which are also important for determining where a stock is likely to change course. The minor cluster of timing cycles comes in on Dec. 5, while a major cluster is due from Dec. 10 to Dec. 13.
Bottom line: I'm looking for the resumption of the rally in this stock between now and next week. As long as shares hold above one of these two price-support clusters, I will take my buy triggers for entries. I'm already seeing a trigger on the 15-minute chart that has me involved with a vertical call spread.
Now, if the most recent low remains intact, the upside potential for a trade-off this area comes in at the $138.83 area. Since we don't always make our lofty targets, I suggest trailing up a stop as you go, assuming the trade moves in your favor. If both my support levels are taken out, I will back off this trade.
For more information on trade triggers, please refer here.