Olin Corporation manufactures and distributes chemical products in the United States and internationally. It operates through three segments: Chlor Alkali Products and Vinyls, Epoxy, and Winchester. The Chlor Alkali Products and Vinyls segment offers chlorine and caustic soda, ethylene dichloride and vinyl chloride monomers, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, trichloroethylene and vinylidene chloride, hydrochloric acid, hydrogen, bleach products, and potassium hydroxide. The Epoxy segment provides allyl chloride and epichlorohydrin for use in resins and other plastic materials, water purification, and pesticides, as well as for the manufacturers of polymers; liquid epoxy resins used in adhesives, paints and coatings, composites, and flooring; and converted epoxy resins for use in electrical laminates, paints and coatings, wind blades, electronics, and construction. The Winchester segment offers shotshell, small caliber centerfire, and rimfire ammunition products for hunters and recreational shooters, and law enforcement agencies; small caliber military ammunition products for use in infantry and mounted weapons; and gauge loads for maintenance applications in power and concrete industries, as well as powder-actuated tools for construction industry.
Take a look at the 1-year chart of Olin (NYSE: OLN) with the added notations:
For most of 2016, OLN had been trending higher. In addition, during the course of the past 4 months the stock had tested the $20 level (red) as support on multiple occasions. Now that the $20 level has been broken, the stock should be taking another step lower.
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The Tale of the Tape:: OLN broke a key level of support at $20. A trader could enter a short position on any rallies up to or near $20 with a stop placed above the level. If the stock were to break back above the $20 level, a long position might 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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach