We are back to check out Spotify (SPOT) as that 160 mark is coming back into play as we talked about here. We initially pointed to the 160 mark as a price target for anyone playing the upside on the stock, well, now that price has been reached and if history tells us anything, it’s that the stock could have a hard time breaking through this level.

Since this level has acted as such strong resistance in the past, it may be time to eye some short plays here. However, not so fast.

Just because a level has acted as resistance in the past doesn’t always mean it will be once the price then approaches again. This is where watching price action and candle formation is so critical to finding out what play to put on at the time.

Predicting would be to say, “I’m going to short when price reaches this level,” where trading smart would be to say, “when price shows weakness or signs of reject off this level I’ll go short with stop loss set at x, in case the trade goes against me.”

This is how you need to view trading. Many traders fall into the trap of trying to predict rather than react and that is why they find trading to be so difficult. Trading isn’t the business of predicting. You need to find these levels, create a plan, and execute on that plan. If you’re able to do that, then even if you lose, you still win because you created and followed a plan.

If SPOT was to make a bullish move above 160, we would want to look for one of our favorite set ups, the break and retest. This would require a break of 160 to the upside, followed by a fall back down to the 160 that is now support, before moving higher once again.

This also requires looking at price action and candle formations in order to gauge how this will work out. However, in both scenarios, risk management is key to your success, both in the trade and over the long term.

Learn to find these levels for yourself when you join The Profit Machine. There, you’ll learn all about my favorite stocks, setups, strategies, and plenty more. You’ll also be invited to weekly webinars where I answer questions and go over important trading lessons, like the one in today’s article. The best part, you’ll also receive live trade alerts. Not only will you get a world-class education, but you’ll earn while you learn.