Hexcel Corporation (NYSE: HXL)

Hexcel Corporation develops, manufactures, and markets structural materials for use in commercial aerospace, space and defense, and industrial markets in the United States and internationally. The company operates through two segments, Composite Materials and Engineered Products. The Composite Materials segment manufactures and markets carbon fibers, fabrics and specialty reinforcements, prepregs and other fiber-reinforced matrix materials, structural adhesives, honeycombs, molding compounds, tooling materials, polyurethane systems, and laminates. The Engineered Products segment manufactures and markets aircraft structures and finished aircraft components, including wing to body fairings, wing panels, flight deck panels, door liners, helicopter blades, spars, and tip caps and fittings as well as for certain industrial applications.

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

1-year chart of Hexcel (NYSE: HXL)

After rallying nicely into 2015, HXL started trading sideways over the following 4 months. While in the sideways move, the stock formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.

HXL’s rectangle pattern formed a resistance at $52 (red) and a $48 support (green). After Monday’s drop, the stock is now back inside that range.

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The Tale of the Tape: HXL is trading back inside its trading range. The possible long positions on the stock would be either on a pullback to $48 or on a breakout above $52. The ideal short opportunity would be on a break below $48.

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