Headwaters Inc (NYSE: HW)

Headwaters Incorporated, a building products company, provides products and services in the light and heavy building materials sectors primarily in the United States and Canada. The company’s Light Building Products segment designs, manufactures, and sells siding and exterior siding accessories, professional tools such as portable cutting and shaping tools; manufactured architectural stone products; and concrete-based masonry products, including standard grey blocks, split and ground faced blocks, and polished and textured blocks. Its Heavy Construction Materials segment markets coal combustion products (CCP), including fly ash that is used as a replacement for Portland cement in various concrete applications, such as infrastructure, commercial, and residential construction; and provides CCP disposal services, as well as services to electric utilities related to the management of CCPs. The company’s Energy Technology segment is involved in the heavy oil upgrading processes, and the liquefaction of coal into liquid fuels.

Take a look at the 1-year chart of Headwaters (NYSE: HW) below with added notations:

1-year chart of Headwaters (NYSE: HW)

HW has been trading mostly sideways for all of 2014. During that time, the stock has run up against a very strong resistance at $14 (blue). The stock is now starting to look like it wants to test the $14 level again, and may be looking to finally break thru that $14 resistance. That break would also constitute a new 52-week high.

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The Tale of the Tape: HW has a 52-week resistance at $14. The possible long position for the stock would be on a breakout above $14.

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

Follow me on Twitter: @cmtstockcoach