This Stock Is Making New Highs. I Hate It.

  • February 15, 2005
  • Derrick Hobbs

Dow Chemical

 

Sentiment: Bullish

 

Recent words coming across my
desk about the chemical companies:

 

“Oh yeah, we got 2 more years
to ride this chemical cycle!”

 

“Dow Chemical is a $70 stock”

 

“You just have to own these
chemical companies.”

 

“Chemical stocks are like the
homebuilders were over the past few years”

 

 

I agree with all of
these statements. However, as a swing trader, this is
not the time to be adding new long positions in this group. I’d like to see a
15-20% correction develop, then look for buying opportunities.  I especially
lean in that direction considering the DOW chart below. We have a Bearish
Butterfly pattern that has completed into a resistance zone that extends from
53-55.50. My target if this pattern plays out to the downside would be 48 to 49
initially. Now, for me to get excited about actually taking action on this
scenario, I need a reversal candlestick pattern on the daily time frame to
trigger. Otherwise I just allow price to keep moving. 

 

 

Bottom line:  My swing trading
analysis would avoid chemicals on the long side today, and defer to another time
for an entry. For the aggressive swing trade, look at short possibilities. I
wouldn’t want price to go above $55.50 if I were playing on the short side. In
that event, I take the loss and move on.

 

That should give you a few
scenarios to play with in chemicals over the coming sessions.

 

Until next time!

 

Derrik

 

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