Yesterday, shares of Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) had a strong performance in a weak market. This price action is a sign of relative strength for the stock. At this point in time, many amateur traders and investors are chasing Himax Technologies, Inc. (ADR) (NASDAQ:HIMX), as it has moved from a low of $5.70, to a closing of price on Monday of $9.82. However, the smart investors and traders think different. As the general population often looks to chase a strong move, or gets sucked into the hype which lags the real price action of a stock; the professionals who do this for a living as we do, take a different approach.
The first thing to do is start looking for levels of resistance to either take profits if already in the trade, or to find resistance points at which to sell short the stock and profit as it pulls back. Let's take a deeper look into the HIMX chart...
I isolated a few levels on Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) that can be utilized to take profits, or with the right pattern sell this equity short. As seen on the chart below, please note that Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) is already nearing the first resistance point at $10.05, the second resistance level will be at $10.91, and finally the third and major resistance level will be at $12.15.
If you're already long Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) those are levels to watch for signs of weakness and take some money off the table, while trailing your stop. If you're not already holding this stock, and you are looking for a shorting opportunity, the best levels to do so will be the 2nd and 3rd levels mentioned previously, depending on how Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) gets there. Remember, that for these levels to be strong and give us a high rate of success, there are factors such as; Pattern and Time that must align perfectly with Price. Without considering these factors, the levels may not present as high profit potential as they otherwise would.