Emcor Group Inc. (NYSE: EME)

Usually, the “keep it simple” trades tend to be the best ones. Although that doesn’t mean the trade will work out in your favor, at least you knew it was the right trade at the time. A stock with a trading opportunity that fits that description would be EME.

EMCOR Group, Inc., together with its subsidiaries, provides electrical and mechanical construction, and facilities services to commercial, industrial, utility, and institutional customers in the United States, the United Kingdom, and internationally. It engages in the design, integration, installation, start-up, operation, and maintenance of various electrical and mechanical systems, including electric power transmission and distribution systems, such as power cables, conduits, distribution panels, transformers, generators, uninterruptible power supply systems, and related switch gear and controls; premises electrical and lighting systems, which include fixtures and controls. Its facilities services include industrial maintenance and services; commercial and government site-based operations and maintenance; military base operations support services; mobile mechanical maintenance and services; floor care and janitorial services; landscaping, lot sweeping, and snow removal services; facilities management; installation and support for building systems; technical consulting and diagnostic services; small modification and retrofit projects.

Please review the 1 yr chart of EME (EMCOR Group, Inc.) below with my added notations:

1 yr chart of EME (EMCOR Group, Inc.)

EME has been trading mostly sideways for the last (7) months. During that time the stock has been holding a very important level of support at $26 (blue). No matter what the market has or has not done over the last (7) months, EME has not broken below $26. However, the stock’s series of lower highs (red) over the last (6) months is a concern considering the overall stock market has moved higher during that time.

The Tale of the Tape: EME has a very important support at $26. A long trade could be made on a pullback to $26 with a stop placed under that level. However, the stock appears to be preparing to break lower, and if it does, a short trade should be made with a stop placed above $26.

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