How to Play the Setup in Capital One

Published on Monday, 28 January 2013 08:00 Written by TradersHuddle Wire

New York, January 28th (TradersHuddle.com) - Capital One Financial Corporation (NYSE:COF) closed the trading day at $56.32, near its 50 day and 200 day moving averages set at $58.62 and $56.29 respectively. Capital One's price action placed the stock above the 200 day moving average but below its 50 day moving average, a setup that signals a possible break out.

Capital One Financial Corporation (NYSE:COF) is a diversified bank. The Bank, through its subsidiaries, offers a broad spectrum of financial products and services, like credit cards and car loans to consumers, small businesses and commercial clients both domestically and internationally. Headquartered in McLean, Virginia, Capital One, N.A. has approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia.

Capital One seems to be setting up for a tight range between the 200 day moving average as support and the 50 day moving average serving as resistance.

A tiered approach, appears to be the best strategy to maximize possible movements in the stock, as traders could establish a small position in Capital One and wait for the stock to break out above its 50 day moving average at $58.62. Then they could add to the position as momentum builds with the breakout. On the flip side, if support being referenced at the 200 day moving average set at $56.29 breaks, it could signal further downside pressure for Capital One.