Solutia Inc. (NYSE: SOA)

Solutia, Inc. is a global manufacturer of performance materials and specialty chemicals used in a range of consumer and industrial applications, including interlayer and aftermarket film for automotive and architectural glass; chemicals that promote safety and durability in tires, and encapsulates, 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. The Company manages its business in three segments: Advanced Interlayers; Performance Films; and Technical Specialties.

To analyze Solutia’s stock for potential trading opportunities, please take a look at the 1-year chart of SOA (Solutia, Inc.) below with my added notations:

 

SOA’s chart is relatively straightforward because of the one simple price level at $18. Not only can you see the (5) month resistance at $18 (red), but $18 has recently started to become support (green) as expected. So, the $18 price is key to this stock. If you are bullish, you would want to see the stock pull back down to $18. However, if you are bearish, you might short SOA on a break of $18.

The Tale of the Tape: SOA presents a couple of very simple trading opportunities based on its key level of $18. A long position could be entered at the $18 support with a stop below that level, or a short play could be made on a break below the $18, if that should happen.

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