A rectangle pattern has formed in the chart of Huntsman Corp. (HUN). When the stock breaches this sideways trading range, a breakout or breakdown is expected.
HUN is a US-based manufacturer of differentiated organic chemical products. The company’s products are used in adhesives, aerospace, automotive, construction products, among others.
The company is benefiting from its growing downstream specialty and formulation businesses. Acquisitions are also aiding growth. In addition, HUN is reducing debt, expanding its margins, and generating strong free cash flows.
The company had $1.6 billion in cash as of the most recent quarter, compared with only $593 million in short-term debt. HUN is also quite profitable with a net margin of 17.2%. Over the past year, both earnings and revenue are down, but earnings are expected to soar 96.6% in the current quarter.
Its stock is fairly valued based on its trailing P/E of 25.16. The stock has shown mixed momentum over the short-term leading to a Momentum Grade of C in our POWR Ratings system.
Take a look at the 1-year chart of HUN below with added notations:
HUN has been rallying higher for the entire past year, but has recently moved into a sideways trading range. While in the range, the stock has formed a resistance level at $29.5o (red), and a level of support at around $26 (green), forming a rectangle pattern.
At some point, the stock will have to either break the resistance or the support. When that happens, the possible long position would be on a breakout above $29.50. The ideal short opportunity would be on a break below $26.
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HUN shares were trading at $27.74 per share on Wednesday morning, up $0.09 (+0.33%). Year-to-date, HUN has gained 10.96%, versus a 5.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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