The Dow Chemical Company is a diversified manufacturer and supplier of products used primarily as raw materials in the manufacture of customer products and services worldwide. It operates in eight segments. Dow provides services to a range of industries, including appliance, automotive, agricultural, building and construction, chemical processing, electronics, furniture, house wares, oil and gas, packaging, paints, coatings and adhesives, personal care pharmaceutical processed foods pulp and paper textile. Its portfolio includes specialty chemical, advanced materials, agro-sciences and plastics businesses deliver a range of technology-based products and solutions to customers in approximately 160 countries.
To analyze Dow’s stock for potential trading opportunities, please take a look at the 1-year chart of DOW (Dow Chemical Company) below with my added notations:
Prior to the August sell-off, DOW had an important support level at $35 (navy). After that August break of support, DOW started forming a strong level of resistance at $30 (green). In the beginning of January the stock broke above that $30 resistance. Now that the stock is trading between the $30 and $35 levels, $30 should act as support on any pullbacks and $35 should now act as resistance if the stock should continue to rally.
The Tale of the Tape: DOW is currently trading between its levels of $30 and $35. A long position could be entered on a pullback to $30 or on a break above $35 with a stop placed below the level of entry. A short trade could be made on a break below the $30 or on a test of the $35 resistance.
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