Todays Big Stock: Solutia Inc (NYSE: SOA)

Patience is important in the stock market. Waiting for the right entry point, waiting for profits, etc. For example, I wrote and article on DAN earlier in the year in which the appropriate trade would have been on a break above 19. But by being patient, a trade would have never been made because DAN never broke above 19.  On the flip side, had DAN broke above 19, patience would have probably paid off. So, another stock worth watching for a potential break higher would be that of Solutia, Inc.

Solutia Inc. is a global manufacturer of performance materials and specialty chemicals used in a range of consumer and industrial applications, including interlayers and aftermarket film for automotive and architectural glass; chemicals that promote safety and durability in tires, and encapsulants, coatings and specialty chemicals used in a variety of electronic, industrial and energy solutions. To serve the company’s customers, it utilizes a global infrastructure consisting of 22 manufacturing facilities, seven technical centers and over 30 sales offices globally, located in the United States, Europe, Latin America and Asia Pacific. Solutia manages its business in three segments: Advanced Interlayers; Performance Films; and Technical Specialties.

Before discussing potential trading opportunities, please take a look at the 1-year chart of SOA (Solutia, Inc.) below with my added notations:

SOA has a clear resistance level at $18 (red). If the stock can breakout above that level, the stock should be moving higher overall. However, some traders may have an urge to jump in early in case the stock does break higher. Remember, patience is key, no need to take a loss if you don’t have to.

The Tale of the Tape: SOA has formed a clear resistance level at $18. A long trade should be made if the stock breaks above that $18 level 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!

Good luck!
Christian Tharp, CMT