Todays Big Stock: Century Aluminum Company (NasdaqGS: CENX)

Since yesterday’s FSL article garnered so much interest, I thought I’d throw out another stock similar to FSL: Century Aluminum Company’s CENX

Century Aluminum Company is engaged in producing aluminum. The company’s primary aluminum capacity includes the facility in Grundartangi, Iceland with capacity of 260,000 metric tons per year; its facility in Hawesville, Kentucky with capacity of 244,000 metric tons per year; its facility in Ravenswood, West Virginia, curtailed, with capacity of 170,000 metric tons per year; and a 49.7% interest in a facility in Mt. Holly, South Carolina, which provides it with capacity of 111,000 metric tons per year. In addition to the primary aluminum assets, Century has a 40% stake in Baise Haohai Carbon Co., Ltd., a carbon anode and cathode facility located in China. The BHH facility has an annual anode production capacity of up to 180,000 metric tons per year and an annual cathode graphitization capacity of up to 20,000 metric tons per year and supplies a portion of the anodes used in its Grundartangi facility.

Please take a look at the 1-year chart of CENX (Century Aluminum Company) below with my added notations:

Just like with yesterday’s FSL, CENX has seemed to find support or resistance on or at the increments of $2. First, you will notice the previous $14 support (purple) from earlier this year. Next, there is a current topside resistance (red) at $12. Lastly, you can see the common $10 level (blue) and the bottom level of support at $8 (green). CENX shows you how to trade it no matter what direction the market moves. If you like the short side of the market, you could either short CENX on rallies up to a $2 level or on any breakdowns of them. If you want a long play instead, you could buy CENX on a pullback to a $2 level or on any breakout through one of those levels.

The Tale of the Tape: CENX finds the increments of $2 important, currently $8, $10, and $12. If CENX breaks out above $10, you could enter a long position with an expectation of a run to $12. However, if you are bearish on the market and CENX rallies back up to $10, you could enter a short play. You could also buy CENX if it comes down to $8, or short the stock if it breaks that $8 support.

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