Hostess Brands (TWNK) Could Be Setting Up To Fail
Hostess Brands, Inc. engages in developing, manufacturing, marketing, selling and distributing baked goods. It operates through their Snacking segment, which consists of sweet baked goods, cookies, bread and buns, and frozen retail products that are sold under the Hostess®, Dolly Madison®, Cloverhill®, Big Texas®, and Voortman® brands.
Take a look at the 6-month chart of Hostess (NASDAQ: TWNK) below with the added notations:
Chart of TWNK provided by TradingView
TWNK has formed an up-trending resistance line and an up-trending support line (blue). These two lines are converging on one another to form a rising wedge, which is a viewed as a bearish pattern. Confirmation of the pattern would occur if the stock broke the up-trending support, which currently sits just above $23.
The Tale of the Tape: TWNK has created a rising wedge pattern. A short trade could be entered on a break of the wedge support. If a trader is instead bullish on the stock, a long play could be made at that support with a stop placed below that level.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key…
Christian Tharp, CMT