Sometimes it is better off not to overthink things. When I first looked at the chart of Owen Corning (OC), I dismissed it. I just worked on the Vulcan Materials (VMC) chart looking for a proper trade and here I am staring at OC. The possibility these two share too much of the same space in terms of high-level business is a small concern. If construction falters, then both could suffer. Still, the space has momentum and the charts provide a clear entry signal as well as a clear stop level, so I come back to the notion: don't overthink it.
The secondary indicators are all here for OC. The Relative Strength Index (RSI) is strong after a short retracement, which has become standard, and now is pushing into overbought territory. The MACD crossed over bullish last week and this has been when the stock has performed best for the past year, so the trend is heading in the right direction. Finally, the On Balance Volume (OBV) is pushing away from the 21-week simple moving average (SMA), so volume is favoring the bulls as well. Momentum, trend and volume all check the bullish box and now we have price joining the group.
The price pattern is simple. This is the most basic notion of the Darvas Box pattern. We see a box (or a channel) of trading and the thesis is to buy a close above the high while using the previous box's low as the stop. When using this pattern, I focus on the closing levels rather than intraday week. Under this notion, there have been five buy triggers over the last year and we've yet to see a weekly closing low below the previous box low. Following this thesis, one would be buying OC on Monday early and using the $42 level as a stop level. This is a wide stop level of 15%, so one should adjust position size accordingly.
Another approach would be to use options with a strike around $45. While this is above the $42 level, these are fairly far into the money and one could go out into March or May for the expiration and still participate in any move higher while using the same $42 closing low as a stop.
Should the stock continue higher and establish a new box, then a new stop level would be established as well as a breakout level. If OC breaks out higher again, then I would look at rolling the option strike higher and potentially longer in duration. If the stock closes below $42, then a trader could look at the idea of a short with an immediate target of $40 with a low potential of $37.
It's the holiday season. I'll take the gifts of clarity, like this chart. It doesn't guarantee a profit in any sense, but it doesn't require deep thought as to where your entry and exit are.