Don't Ignore This Chart!

Will This Paper Company Hold Key Gap Support?

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Domtar Corp (UFS) has returned to a key support zone between 37.00-37.50.  A close below this level would be bearish as Domtar's longer-term chart is neutral at best.  I'd be looking for the top of the earnings-related gap higher in late July to hold.  That day, the open was 37.50 and the intraday low was 36.93.  Since then, UFS has fallen back below 37.50 on multiple occasions with its only intraday low beneath 36.93 coming on August 31st when UFS touched 36.86.  A reversing hammer candlestick formed, though, and UFS quickly recovered to near 39.00 just three days later.  Now, it's rinse and repeat.  Take a look:

The SCTR rank surged on the earnings results, moving above 70 - similar to the false move in late March.  Given its history of failure, I'd keep a tight stop beneath 36.75.  Holding this support zone and pushing back toward its post-gap high of 40.00 would result in a solid reward to risk trading candidate.

Happy trading!

Tom


 

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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