These three stocks: INTC, GIS, and NWL are all trading near support. Support is an area on a price chart that has caused the price to stop falling and rally. Support comes in many forms, for example, it may be a specific price level or an angled trendline. Support doesn't mean that the price will go higher, but support can often be an advantageous entry location. If a trader believes the price will rise off the support area, then risk can be minimized with a stop loss order below support, and the trader can potentially benefit if the price does in fact rise. 

Intel Corp. (INTC) has been respecting a rising trendline extending back to late 2015. The price has declined to the trendline, and bounced off of it, five times since the start of 2016. In February, the price declined to trendline support at $35 and bounced off it. As of Feb. 21, the stock closed at $36.52. Getting in near that $35 region now will require the price pull back a bit.

On the upside, there is resistance between $37.90 and $38.45. The price has stalled in this area in 2014, 2016 and recently in 2017. If going long, a conservative profit target could be placed in this resistance area. On the other hand, if the price can break through that area, it could move well above $40 in the coming months. A decline below $33.40, though, warns that resistance has likely held and a double-top formation would indicate a decline in the $30 region.

General Mills Inc. (GIS) broke below an important $60 support level on Feb. 17, but then quickly jumped back above it on Feb. 21. The price has been hovering just above $60 since October, but this level has been playing support and resistance going back to mid-2015. The quick drop and rally indicates that there wasn't any selling pressure below $60, so buying between $60.50 and $60 could provide some short-term upside. A stop loss could go below the Feb. 17 low of $58.70. On the upside, $63.50 to $64 has been resistance since October and provides a potential exit for long trades. Alternatively, if a trader believes the price can break above the $64 region, then a target could be placed between $67 and $68 (size of the recent range, added to breakout price). A decline below $58.70 warns of further downside, with little support until $55 to $54.

Newell Brands Inc. (NWL) closed at $46.49 on Feb. 21, just above the $43 to $45 area which has been in effect since early 2016. In the latter part of 2015, this area acted as resistance. A purchase near $44, with a stop loss below $43, provides a trade with about $1 of risk (per share) and conservative upside of about $4. Since November that stock has stalled just below $48. Therefore, a conservative exit point would be just below $48, capturing these short-term oscillations. If a trader is bullish on the long-term prospects of the stock, this could be a turned into a longer-term trade. If the price does rally above $48, the short-term range added to the breakout price gives an approximate target of $52. In that case, the reward:risk is 8:1.

The Bottom Line

Support should be viewed as an area of interest. Support has caused the price to bounce in the past, and if that holds true, it may present a worthwhile trade. Before taking a trade consider the entry point, stop loss level and target level. Base these levels on recent price patterns and volatility. The potential reward of a trade should always exceed the risk. While the defined support levels may have worked in the past, they may not work in the future. Trend changes can occur at any time, which is why risk on any single trade should be contained to a small amount of account capital. 

Disclosure: The author doesn't have positions in the stocks mentioned.