Louisiana-Pacific Corporation, together with its subsidiaries, manufactures and sells building products primarily for use in new home construction, repair and remodeling, and outdoor structures, as well as light industrial and commercial construction. It operates in four segments: North America Oriented Strand Board; Siding; Engineered Wood Products; and South America.
Take a look at the 1-year chart of Louisiana (NYSE: LPX) below with added notations:
During the months of February and March, LPX was moving in a sideways trading range. While in the range, the stock formed a common pattern known as a rectangle. The pattern had a resistance at $25 (red), and a $23 support (green). LPX had broken out of the rectangle, but is now back within it.
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The Tale of the Tape: LPX is trading back within a prior rectangle pattern. The possible long positions on the stock would be either on a pullback to $23 or on a breakout above $25. The ideal short opportunities would be on a break below $23, or on a rally up to $25.
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