Methanex Corporation (NASDAQ: MEOH)

Methanex Corporation produces, supplies, and sells methanol to petrochemical producers and distributors. The company also purchases and re-sells methanol produced by others. Its methanol is a clear liquid commodity chemical that is used to produce traditional chemical derivatives, including formaldehyde, acetic acid, and various other chemicals. The company’s methanol is used in energy-related applications; for blending into gasoline, as a feedstock in the production of dimethyl ether, which can be blended with liquefied petroleum gas for use in household cooking and heating, and in the production of biodiesel; and to produce methyl tertiary-butyl ether, a gasoline component, as well as used into olefins applications. In addition, it operates a fleet of methanol ocean tankers with a capacity ranging from 3,000 to 100,000 deadweight tons.

To review Methanex’s stock, please take a look at the 1-year chart of MEOH (Methanex Corporation.) below with my added notations:

1-year chart of MEOH (Methanex Corporation.)

MEOH has formed a key level of support at $55.00 (blue) over the last (3) months. In addition, the stock has created a down trending resistance starting from the middle of November (red). These two lines combined have MEOH stuck trading within a common chart pattern known as a descending triangle. At some point, the stock has to break support or break its string of lower highs.

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The Tale of the Tape: MEOH has formed a descending triangle pattern. A short trade could be made on a break of the $55.00 support level. A break through $60.00 would break the down trending resistance and would set up a potential long trade.

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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

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