Owens Corning Rally Should Continue After This Pullback

 | Sep 11, 2017 | 10:34 AM EDT
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The rally in Owens Corning (OC) the last month seemed to take on more urgency as prices jumped $10 in a relatively short period of time. A small upside price gap can also be seen recently. Prices are lower in early trading Monday. How does this short-term action look when combined with a longer-term uptrend?

Let's take a look at the charts and indicators for OC and see if we can focus on a clear strategy for the weeks ahead.

In this daily bar chart of OC, above, we can see chart support in the $68-$64 area but no nearby resistance. Prices are above the rising 50-day moving average line as well as the rising 200-day line. The daily On-Balance-Volume (OBV) is mildly positive from last September, dips in July and then starts rising again last month. I always like to see a rising OBV line with an uptrend as it gives me more confidence that buyers of the security are being aggressive with move volume being transacted on days when the stock has closed higher.

The trend-following Moving Average Convergence Divergence (MACD) in the bottom panel has turned up from above the zero line for a fresh go long signal.

In this weekly bar chart of OC, above, we can see how effective the rising 40-week moving average line has been in defining the uptrend and keeping trend-following traders on the right side of the stock. The weekly OBV line has been up for most of the past three years and supports and confirms the advance. The weekly MACD oscillator also turned up like the daily chart to confirm the bull move under way.

In this Point and Figure chart of OC, above, we see the uptrend and a potential price target of $82.18. Support begins around $68.77.

Bottom line: Large rallies are typically preceded by a period of accumulation and big declines can follow significant top patterns. There is no top pattern on OC so I would look for the dip in the shares today to be short-lived and aggressive traders looking to add to long positions might consider this pullback as a buying opportunity.

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