Staples (SPLS) has been struggling to stay up with the broader market’s new highs and has been dead money for longs for over a year.
GAP ACTION
Looking back at key chart action, on May 5, 2011, SPLS had an igniting gap down. SPLS traded for a entire year between $17.00 and $12.00 without a recovery from that gap down.
LOTS OF SUPPLY
This shows that the stock is being overtaken with supply. On May 16, 2012 SPLS broke from its yearly price consolidation with a continuation gap down into the $14.00 price area, and just recently SPLS had another continuation gap down under $12.00.
HUNTING FOR BUYERS
SPLS is hunting for demand levels where buyers will come in and support it. The weekly gives a clearer picture of where SPLS may be headed longer-term. Key demand exists at $8.00 from 2000 to 2003.
THE TRADE
Initiate a short position on any bounce into $14.00. Target lies at $8.00 off the weekly chart.
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