Is Sohu.com Setting up for a Break Out?

Published on Monday, 12 July 2010 07:20 Written by Christopher Lynn

New York, July 12th (TradersHuddle.com) - Shares of Sohu.com Inc. (NASDAQ:SOHU) closed the trading session at $41.25 placing the price action in a very tight range, given that calculated support is set at $40.05 and the calculated resistance based on an algorithm of peaks and troughs is set at $42.44

Sohu.com Inc. (NASDAQ:SOHU) operates an Internet portal in China. The Company's Web site consists of Chinese language Web navigational and search capabilities, Web-based communications services, and a platform for e-commerce services.

Sohu's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Sohu's price action, as any movement outside its predefined range of $40.05 and $42.44 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $40.05 could spark above average selling. A tiered approach can be a good way to approach starting a position in Sohu's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.