Today’s Big Stock: Owens Corning Inc Common Stock (NYSE: OC)

Owens Corning, Inc. is a producer of glass fiber reinforcements and other materials for composites and of residential and commercial building materials. The Company’s products range from glass fiber used to reinforce composite materials for transportation, electronics, marine, infrastructure, wind-energy and other markets to insulation and roofing for residential, commercial and industrial applications. It operates in two business segments: Composites, which includes its reinforcements and downstream businesses; and building materials, which include its insulation, roofing, and other businesses. As of year-end 2010, the company’s composites and building materials segments accounted for approximately 37% and 63% of its total segment net sales.

Please take a look at the 1-year chart of OC (Owens Corning, Inc.) below with my added notations:



The chart of OC is interesting due to the presence of (2) converging support levels. First, the potential of an up-trending support level (blue) has developed. A 3rd test of that line would confirm its importance, but (2) points commonly start the trend line. Next, OC had a very strong resistance at $30 (brown). Now that the stock is above that $30 level, traders would expect it to be just as strong of a support.

The Tale of the Tape: OC has (2) support levels, both of which currently sit at or near $30. If the stock pulls back to $30 a long trade would be advisable. However, if the stock were to break below $30, thus breaking both supports, a short play should be made instead.

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