Norbord Inc. taking a breather

Jan 16th, 2013 – Comment

The six-month chart offers some interesting highlights including the breach of the uptrend line that has supported the advance.


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Hi Lou,

I have been following Norbord for a while now. I do not own shares but the base looks good for the case to do so.
I would appreciate your opinion.

Tom

 

Hey Tom,

Thanks for the assignment. Norbord Inc. (NBD TSX) is a manufacturer of wood panels used in the construction industry. They produce flooring, roofing, sheathing, and industrial oriented strand board and medium density fiber board. The company operates 11 OSB mills,  one MDF mill, and two particle board mills and a furniture plant. The facilities are located in Canada, the United States, and Europe.

In 2012 the stock broke above a grinding downtrend that started in 2004 as the problems in U.S. the housing  began to surface. A review of the charts will identify some interesting patterns worth examining as part of a well rounded evaluation.

 

The three-year chart illustrates a text book example of a double bottom that formed in late 2011. A double bottom is a reversal pattern that signals that the selling pressure that has plagued a stock is coming to an end. The move off the rock bottom was followed by the formation of a golden cross in March of 2012 indicating that the shares had more to give. Finally the break above resistance at $12.00 and then $14.25 set the stage for a rapid advance.

What we can also glean from the chart is that trees do not grow to the sky. The shares have been struggling to continue the advance since December of 2012. The RSI indicated that the stock was overbought and the MACD turned lower at the same time alerting the informed investor that it was time to harvest some of the profits generated by this very generous opportunity.

 

 

 

 

 

The six-month chart offers some interesting highlights including the breach of the uptrend line that has supported the advance. In addition it is worth noting that the shares moved higher at such a rapid pace that they failed to establish much support along the way. The next level of support comes in at $26.00 and below that at $22.00.

 

I think the best course of action is to be patient and see if NBD can shake off the sellers and return to an uptrend before putting in a buy order.

 

Make it a profitable day and happy capitalism!

Categories: Forestry
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