Three Line Price Break stock pick: Coherent (COHR)

Since picking Dolby and Arch Capital stocks for long trades, today Three Line Price Break trading system suggests short-selling Coherent stock in case COHR shares trade below yesterday’s low at $52.57. The signal includes a red candle printing a new 4-day low, following three green successive candles in the box chart.

cohr-daily-stock-chart

If the signal is confirmed by a new low and resistance level at $55.15 holds, maybe the 3-month uptrend will come to an end. $52-55 area has acted both as support and resistance level before for Coherent stock.

cohr-weekly-stock-chart

What could the future bring for COHR stock? Perhaps a downswing to $40 or a breakout to all-time high at $65. But that doesn’t really matter, since according to the strategy the stop loss should be placed at $55.20 protecting our capital and the profit target needs to be placed just at 2 times the length of the red candle, that is at $48.50. If traders sell short at $52.50, the reward-risk ratio of this trade comes down to 1.5 – 1. Of course we may scale out and only trade out half of the position at the first profit target, willing to gamble on a stronger downtrend.

Disclaimer: I’m long DLB, ACGL and plan to initiate a short entry at COHR within the next 48 hours.

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