For the next several articles, I am going to focus on stocks that have recently hit new highs and how to trade them. When it comes 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, it was a key breakout. One such stock that fits that description would be that of Kirby Corporation.
Kirby Corporation operates inland tank barges and towing vessels, transporting petrochemicals, black oil products, refined petroleum products and agricultural chemicals throughout the United States inland waterway system. It also owns and operates four ocean-going barge and tug units transporting dry-bulk commodities in United States coastwise trade. Through the diesel engine services segment, it provides after-market service for diesel engines and reduction gears. It has two segments: marine transportation and diesel engine services
Please take a look at the 1-year chart of KEX (Kirby Corporation) below with my added notations:
KEX had been trading sideways from March through October. During that time, the stock created a $60 resistance (navy). That $60 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if KEX could manage to break above it. Well, back in October the stock finally broke through that $60 resistance. As expected, that old $60 resistance became a new support (l blue).
After the breakout above $60, KEX created a new 2-month resistance at $65 (green). The stock has broke above that level as well, and now that $65 level is acting as support (l green).
The Tale of the Tape: While trading sideways for most of the year, KEX formed a key resistance level of $60, which was a 52-week high breakout when KEX broke above it. This should signaled higher prices ahead for the stock. Now, the stock has created a new level at $65. A long trade could be made on any pullbacks to the $65 level. If the stock should happen to break below $65, the next entry for a long trade would be at the previous $60 level. A break of $60 would negate the forecast for the stock to move higher.
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