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A Trade That Works On Two Fronts

As I have said many times in the past in these pages there are two basic types of analysis for anything traded, fundamental and technical, and the best trades are when they both suggest the same thing. Usually, because I generally adopt a “top-down” style, the fundamental case comes first, and is then confirmed by the technical. Sometimes, however, I am struck by a chart first and the more I think about it, the more the fundamental case supports the trade. That was the case this week when I looked at the environmental services company, Clean Harbors (CLH). The big potential advantage when that happens is that the technical factors can protect you on the downside, and can even provide a short-term pop, after which the fundamental factors kick in to maintain that momentum.

(Click to enlarge)

Let’s start, as I did, with the chart. To anybody who knows my trading style the set-up here is pretty obvious. CLH has been essentially trading in a range all year, and a recent drop saw the stock approach the low of that range. It got to 51.43 before bouncing back to 52.82 over the last few days. That bounce is important for two reasons. Firstly it results in a potential level of support in front of the 52-week low of 49.63 off of which I would set a stop-loss. Secondly, the last move down forms the fifth wave of an admittedly imperfect but still recognizable Elliot Wave pattern. The fact that there have been five legs doesn’t necessarily…

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