Today’s article focuses on a stock approaching a 52-week high. As a reminder, when it comes a stock hitting a 52-week high, I prefer to look for ones hitting a “NEW” high. To clarify, this 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.
Cytec Industries Inc., a specialty chemicals and materials company, engages in developing, manufacturing, and selling chemical products primarily for aerospace composites, structural adhesives, automotive and industrial coatings, electronics, inks, mining, and plastics markets. The Engineered Materials segment offers aerospace-qualified and industrial-grade prepregs, resin infusion systems, structural/surfacing adhesives, pressure sensitive adhesives, and formulated resins, and carbon fiber reinforcements. The In-Process Separation segment provides mining chemicals, including flotation promoters, collectors, frothers, dispersants and depressants, solvent extractants, flocculants, filter and dewatering aids, antiscalants, and defoamers. The Additive Technologies segment offers polymer additives, such as ultraviolet light stabilizers and absorbers, high performance antioxidants, and antistatic agents. The Coating Resins segment provides specialty coating resins comprising coating additives and waterborne resins; conventional and ultraviolet curable powder coating resins and industrial coating resins. The company sells its products and services directly, as well as through distributors primarily in North America, Europe, the Middle East, Africa, the Asia-Pacific, and Latin America.
To review Cytec’s stock, please take a look at the 1-year chart of CYT (Cytec Industries, Inc.) below with my added notations:
CYT has been trading mostly sideways from February until present, while running into a clear resistance at $65 (navy). After briefly falling below the $56 support (brown) level in June, the stock has worked its way back up to the $65 resistance. The $65 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if CYT could manage to break above it. IF that were to happen, the stock should be heading higher overall.
The Tale of the Tape: CYT has formed a key resistance level at $65, which would be a 52-week high breakout if the stock can break above it. A long trade could be entered if CYT breaks above $65 or pulls back to $56, with a stop set below the level of entry.
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