“Trade of the Day” for Monday, 11/18

Garmin Ltd. (GRMN) is a $9.33 billion technology company that designs, develops, manufactures, and markets hand-held, portable and fixed-mount global positioning system (GPS) enabled products and other navigation, communication, and information products for the automotive/mobile, outdoor, fitness, marine, and general aviation markets worldwide.

Any time a stock sells off, you wonder whether it’s a short-term move lower with the next uptrend right around the corner or is it something to really worry about.

Well, we look to the technicals.

In the case of GRMN, note that the long-term negative divergence and failed breakout (black candle) suggested we’d see short-term selling – probably more than the stock had seen in awhile.

Sure enough, we saw a move back to test the rising 50 day SMA, which reset the MACD all the way back to centerline support with an RSI reading at 40.

Tom’s Take: While none of this guarantees a move higher in GRMN, it certainly set up the reward to risk favorably for a long position.

— Tom Bowley, Invested Central

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Disclaimer: You should consider these educational charts and analysis for possible short-term trades only. We are not registered investment advisors and the Trade of the Day should not be viewed as investment advice. Accordingly, please check with your financial advisor before deciding to buy or sell any of these investment securities. Because we do not recommend holding a stock into its earnings report, please check all earnings dates on stocks featured before making a decision on whether to consider a trade. Invested Central’s staff may take long, or short positions in stocks, bonds, and other financial contracts on which they comment.

Tom Bowley, Invested Central

Invested Central Chief Market Strategist and StockCharts.com contributor Tom Bowley has taught thousands of traders around the world how to analyze the markets and make money trading.