Trading Idea: Is United Microelectronics Breaking Down?

Published on Tuesday, 29 May 2012 09:28 Written by TradersHuddle Wire

New York, May 29th (TradersHuddle.com) - Shares of United Microelectronics Corporation (NYSE:UMC) closed the trading session at $2.20 below calculated support at $2.26. The stock broke down technically, raising concerns as the move might trigger additional selling.

United Microelectronics Corporation (NYSE:UMC) manufactures, and markets integrated circuits and related electronic products. The company specializes in contract manufacturing of customer designed integrated circuits for semiconductor applications. Its main products are integrated circutis for consumer electronic, memory, personal computer, peripherals, communications.

United Microelectronics' stock was trading in a well defined range with support at $2.26 and resistance at $2.72; given that this range was broken traders will be closely monitoring the stock's price action for clues of direction.

From a technical perspective, it can be expected that previous support becomes resistance, as the new range gets defined. However, $2.26 will remain in focus as United Microelectronics' price action places the stock near the broken support. Traders will be waiting to see if it can bounce back and return to its previous range.

Traders wanting to establish a short position in United Microelectronics can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $2.26. However, if traders want to build a long position, the best entry point to do so is when the price action takes the stock back to calculated support.