The technical breakout strategy is built on two distinct assessments: the technical health of a stock and the quality of its current chart pattern. A stock can have a strong underlying trend but be too extended to offer a favorable risk/reward entry, while a stock with a perfect consolidation pattern is of little use if the overall trend is poor. By screening for securities that score well on both the proprietary ChartMill Technical Rating and the ChartMill Setup Quality Rating, investors aim to identify names that are both trending in the right direction and forming a viable buy point.
One stock currently passing this screen is James Hardie Industries PLC (NYSE:JHX), an Ireland-based manufacturer of fiber cement siding, fiber gypsum, and composite decking products. While it operates in the construction materials space, a sector that is not typically associated with high-growth momentum, the technical readings warrant a closer look.
Solid Technical Foundation Supported by a Rising Trend
The first pillar of the breakout approach is the Technical Rating, and JHX receives a score of 7 out of 10. This places it firmly in 'uptrend' territory (scores of 7 or above), driven by a positive long-term trend. The moving average structure reinforces this view: the 20-day, 50-day, 100-day, and 200-day simple moving averages are all rising, with the stock currently trading above all of them. The long-term trend is confirmed as positive, even though the short-term trend has flattened to neutral.
Relative strength is a key component of the technical rating, and JHX outperforms 84% of the other stocks in the Construction Materials industry. Compared to the broad market, it outperforms 60% of all stocks on a one-year basis. While the stock is currently trading in the middle of its 52-week range---lagging the S&P 500 slightly---the trajectory of the moving averages and the positive long-term trend provide a solid foundation from which a breakout can occur. The stock also benefits from strong liquidity, with average daily volume of nearly 7.9 million shares, a practical advantage for entering and exiting positions.
Near-Perfect Setup Quality Indicates a Strong Entry Point
A high technical rating is only half the equation. Without a good setup, a trending stock can lead to poor entry timing. This is where JHX stands out, receiving a Setup Rating of 10 out of 10, the highest possible score. The setup analysis indicates that prices have been consolidating in a relatively tight range, with the stock currently in a pullback that offers a potential entry opportunity.
Several specific factors contribute to this perfect setup score. There is very little resistance above the current price, and a defined support zone exists between $24.12 and $24.28, formed by a combination of multiple trend lines and moving averages. The trade suggestion from the automated analysis points to a buy stop order at $25.97, just above a weekly trend line resistance, with a stop-loss placed below that support zone at $24.11, limiting the worst-case loss to roughly 7.2%.
Furthermore, the setup is reinforced by institutional accumulation signals. The effective volume indicator has detected large-player interest in the stock over recent days, and a pocket pivot signal was observed. A pocket pivot is a specific price/volume pattern that often precedes a meaningful advance, and when combined with institutional buying, it adds conviction to the consolidation pattern.
Why This Combination Matters for the Strategy
For a technical investor, the goal is to find stocks with institutional sponsorship and strong underlying trends that are currently pausing or consolidating. JHX meets these criteria: it has a positive long-term trend that has pushed all major moving averages higher, it has demonstrated relative strength within its industry, and it is currently building a tight base with clear support and resistance levels. The high setup rating suggests that the risk/reward profile for an entry near the suggested buy point is favorable compared to chasing a stock that has already made a sharp move higher. Investors looking for more stocks displaying similar technical and setup characteristics can find fresh results daily using the Technical Breakout Setups screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Always conduct your own analysis and consider your own risk tolerance before making any trading decisions.
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James Hardie Industries PLC (NYSE:JHX) Shows Strong Technical Breakout Setup
The technical breakout strategy is built on two distinct assessments: the technical health of a stock and the quality of its current chart pattern. A stock can have a strong underlying trend but be too extended to offer a favorable risk/reward entry, while a stock with a perfect consolidation pattern is of little use if the overall trend is poor. By screening for securities that score well on both the proprietary ChartMill Technical Rating and the ChartMill Setup Quality Rating, investors aim to identify names that are both trending in the right direction and forming a viable buy point.
One stock currently passing this screen is James Hardie Industries PLC (NYSE:JHX), an Ireland-based manufacturer of fiber cement siding, fiber gypsum, and composite decking products. While it operates in the construction materials space, a sector that is not typically associated with high-growth momentum, the technical readings warrant a closer look.
Solid Technical Foundation Supported by a Rising Trend
The first pillar of the breakout approach is the Technical Rating, and JHX receives a score of 7 out of 10. This places it firmly in 'uptrend' territory (scores of 7 or above), driven by a positive long-term trend. The moving average structure reinforces this view: the 20-day, 50-day, 100-day, and 200-day simple moving averages are all rising, with the stock currently trading above all of them. The long-term trend is confirmed as positive, even though the short-term trend has flattened to neutral.
Relative strength is a key component of the technical rating, and JHX outperforms 84% of the other stocks in the Construction Materials industry. Compared to the broad market, it outperforms 60% of all stocks on a one-year basis. While the stock is currently trading in the middle of its 52-week range---lagging the S&P 500 slightly---the trajectory of the moving averages and the positive long-term trend provide a solid foundation from which a breakout can occur. The stock also benefits from strong liquidity, with average daily volume of nearly 7.9 million shares, a practical advantage for entering and exiting positions.
Near-Perfect Setup Quality Indicates a Strong Entry Point
A high technical rating is only half the equation. Without a good setup, a trending stock can lead to poor entry timing. This is where JHX stands out, receiving a Setup Rating of 10 out of 10, the highest possible score. The setup analysis indicates that prices have been consolidating in a relatively tight range, with the stock currently in a pullback that offers a potential entry opportunity.
Several specific factors contribute to this perfect setup score. There is very little resistance above the current price, and a defined support zone exists between $24.12 and $24.28, formed by a combination of multiple trend lines and moving averages. The trade suggestion from the automated analysis points to a buy stop order at $25.97, just above a weekly trend line resistance, with a stop-loss placed below that support zone at $24.11, limiting the worst-case loss to roughly 7.2%.
Furthermore, the setup is reinforced by institutional accumulation signals. The effective volume indicator has detected large-player interest in the stock over recent days, and a pocket pivot signal was observed. A pocket pivot is a specific price/volume pattern that often precedes a meaningful advance, and when combined with institutional buying, it adds conviction to the consolidation pattern.
Why This Combination Matters for the Strategy
For a technical investor, the goal is to find stocks with institutional sponsorship and strong underlying trends that are currently pausing or consolidating. JHX meets these criteria: it has a positive long-term trend that has pushed all major moving averages higher, it has demonstrated relative strength within its industry, and it is currently building a tight base with clear support and resistance levels. The high setup rating suggests that the risk/reward profile for an entry near the suggested buy point is favorable compared to chasing a stock that has already made a sharp move higher. Investors looking for more stocks displaying similar technical and setup characteristics can find fresh results daily using the Technical Breakout Setups screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Always conduct your own analysis and consider your own risk tolerance before making any trading decisions.
Read full article here »