Illinois Tool Works Inc. (NYSE: ITW)

llinois Tool Works Inc. manufactures various industrial products and equipment worldwide. Its Transportation segment offers plastic and metal components, fasteners, and assemblies; fluids and polymers; fillers and putties; polyester coatings, and patch and repair products. The companys Power Systems & Electronics segment provides arc welding equipment; metal arc welding consumables and related accessories; metal solder materials; equipment and services for microelectronics assembly; electronic components and component packaging. Its Industrial Packaging segment offers steel and plastic strapping and related tools and equipment; plastic stretch film and related equipment; paper and plastic products that protect goods in transit; and metal jacketing and insulation products. The companys Food Equipment segment provides warewashing, cooking, refrigeration, and food processing equipment; and kitchen exhaust, ventilation, and pollution control systems; and food equipment service, maintenance, and repair. Its Construction Products segment offers anchors, fasteners, and related tools; metal plate truss components, and related equipment and software; and packaged hardware and other products for retail. The companys Polymers & Fluids segment provides adhesives; chemical fluids; epoxy and resin-based coating products; and hand wipes and cleaners. Its Decorative Surfaces segment offers laminate for furniture, office and retail space, and countertops; and laminate worktops.

To review Illinois’ stock, please take a look at the 1-year chart of ITW (Illinois Tool Works, Inc.) below with my added notations:

1-year chart of ITW (Illinois Tool Works, Inc.)

Back in March, April and May ITW created a key resistance level at $58 (navy). That resistance level was a 52-week high breakout when the stock shot higher in mid-August. That breakout was a sign that the stock should be moving higher, which the stock did do. Now that ITW is pulling back, the old $58 resistance should provide support for the stock as it has already done on (4) separate occasions.

The Tale of the Tape: ITW broke out to a new 52-week high in mid-August and has now pulled back. A long trade could be made at $58 with a stop placed below that level. If the stock were to break below $58, a short trade should be considered 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