Babcock & Wilcox Co (NYSE: BWC)

The Babcock & Wilcox Company operates as a specialty constructor of nuclear components for customers in the power and other steam-using industries. The company’s Power Generation segment designs, engineers, manufactures, supplies, constructs, and services utility and industrial power generation systems, including boilers used to generate steam in electric power plants, pulp and paper making, chemical and process applications, and other industrial uses. Its Nuclear Operations segment manufactures naval nuclear reactors for the U.S. Department of Energy/National Nuclear Security Administration’s Naval Nuclear Propulsion Program, which in turn supplies them to the U.S. Navy for use in submarines and aircraft carriers. The company’s Technical Services segment provides services to the U.S. Government comprising uranium processing, environmental site restoration services, and management and operating services for various U.S. Government-owned facilities. Its Nuclear Energy segment fabricates pressure vessels, reactors, steam generators, heat exchangers, and other auxiliary equipment.

Take a look at the 1-year chart of Babcock (NYSE: BWC) with the added notations:

1-year chart of Babcock (NYSE: BWC)

BWC has been trading mostly sideways since August of last year. In addition, the stock has found support at $27.50 (red) whenever that level has been approached. Now that the stock appears to be have broken that support, lower prices should follow.

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The Tale of the Tape: BWC broke a key level of support at $27.50. A trader could enter a short position on any rallies up to or near $27.50 with a stop placed above the level. If the stock were to break back above the $27.50 level, a long position could be entered 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

Follow me on Twitter: @cmtstockcoach