MELI ascends towards a break

MercadoLibre, Inc. hosts online commerce platforms in Latin America. It offers MercadoLibre Marketplace, an automated online e-commerce service for businesses and individuals to list items and conduct their sales and purchases online in a fixed-price or auction-based format.

Take a look at the 1-year chart of Mercado (Nasdaq: MELI) below with my added notations:

MELI has formed a clear resistance at $130 (green), which was also a support prior. In addition, the stock is climbing a very short-term, uptrending support level (blue) over the last couple of weeks. These two levels combined have MELI stuck within a common chart pattern known as an ascending triangle.

Eventually, the stock will have to break one of those levels, and the stock’s overall movement implies a break lower.

The Tale of the Tape: MELI has an uptrending support and a $130 resistance level to watch. A long trade could be made on a breakout above $130. A break below the uptrending support, or on a rally up to $130, would be an opportunity to enter a short trade.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

@cmtstockcoach