Technicals: Channels

For those of you looking to buy on a bargain, today's technical analysis tip may be of interest.


Take a look at this chart.


Notice the lines I have drawn on the chart. The line slightly above $30 would be considered an Upper Channel, and the line drawn through $17 is the Lower Channel. This chart is the 10 year history of MAS. A supplier of building materials to various industries you can definitely say the stock is not in favor of the market. What you can say, is Masco consistently trades between $17-$31/share. When the price goes above the $31 point, they either split the stock, or the stock corrects itself, in pretty quick fashion. What this chart also tells you is that this stock will "bottom-feed" around $17/share. Using Warren Buffet's investing strategy, you could see MAS as undervalued.

This $17/share price technical indicator tells you the stock is near its 10-year low and is probably a decent time to dip in and hold on for a while. Now getting a stock such as MAS to $31/share is going to take time, patience, and understanding. Not common traits of most investors. Therefore, only use this indicator if you have it within you to wait a healthy company like MAS out.