As I’ve mentioned in previous articles, when it comes to entering a stock hitting a 52-week high, I prefer to look for ones hitting a “NEW” high. To me, his would be a stock that hasn’t hit a new 52-week high in quite some time. In addition, and more importantly, I want the stock to have broken through a key area of resistance. This way I know that it wasn’t just any move higher. One such stock that fits that description would be that of Westport Innovations, Inc.
Westport Innovations Inc. is a provider of engine and fuel system technologies utilizing gaseous fuels. The company’s technology and products enable light, medium, heavy-duty and high-horsepower petroleum-based fuel engines to use primarily natural gas. Westport has sold over 30,000 natural gas and propane engines to customers in more than 19 countries. The company leverages its technology by partnering with diesel engine and truck original equipment manufacturers (OEMs) to develop, manufacture and distribute its engines to a group of global truck and bus OEMs. Westport’s business operates in three segments: Cummins Westport Inc. (CWI) which serves the medium- to heavy-duty engine markets; Juniper Engines Inc. (Juniper) which designs, produces and sells high-performance alternative fuel engines, and other which includes Westport Heavy Duty (Westport HD).
To review Westport Innovation’s stock, please take a look at the 1-year chart of WPRT (Westport Innovations, Inc) below with my added notations:
WPRT has been trading sideways for the last 5 months, while running into resistance at $28 (green). That $28 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if WPRT could manage to break above it. Yesterday the stock finally broke through that $28 resistance on a volume increase of 200%! This is definitely the “NEW” 52-week high resistance breakout I like to see. From here, the stock should be heading higher, most likely on a new uptrend.
The Tale of the Tape: While stuck in a sideways move, WPRT has formed a key resistance level of $28, which was a 52-week high breakout since WPRT broke above it. This should signal higher prices ahead for the stock. A long trade could be entered now, or if WPRT pulls back a bit further to $28, with a stop set below the $28 level. If the market were to sell-off substantially, and bring WPRT back down to $20 (dark blue), a long position could also be entered there with a stop 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