This building materials stock has a favorable setup and a breakout could be in the cards, charts show
Owens Corning , best known for its iconic Pink Panther-branded insulation, is one of the most recognizable names in the building products industry. Its products touch nearly every corner of the housing market. Its brand includes a leading portfolio of roofing shingles, fiberglass composites and residential doors. On Wednesday, shares jumped more than 4% on an earnings beat despite a soft residential backdrop. While near-term challenges remain — including higher interest rates, uneven housing activity and cautious consumer spending — the company’s cost-cutting and restructuring playbook is working even as top-line growth stays flat. Fundamentally, this is impressive in a weak housing market. Technically, this is exactly the setup that gets me excited. While it lacks the volatility and excitement of a tech stock, it has a risk/reward potential that every patient investor should crave. Let’s break down the charts over multiple time frames. Near term Over the one-year daily chart we are seeing one of my favorite reversal patterns developing. Some call this a classic cup-and-handle. Others call it a rounded-bottom base formation. Whatever you call it, I see opportunity. On the daily chart we have clear lines of support and resistance forming but are lacking confirmation of a bigger move. The stock is in a near-term uptrend with a series of higher highs and higher lows. It has broken above two key moving averages in its 50-day and 200-day and also sits above its anchored volume-weighted average price, or VWAP, going back to its annual high set in December 2024. Momentum is also showing signs of progress. Both the moving average convergence divergence and relative strength index, known respectively as MACD and RSI, continue to trend higher. The MACD is giving us a buy signal on a daily basis, and the RSI has broken a recent downtrend and remains far from overbought. The $160 level is clear resistance. It has tested there twice and failed. This recent pullback is a perfect flagging situation that has held key levels of support and should bounce again with the potential to finally breakout. Intermediate term Let’s break down the stock using a weekly chart going back five years. Here we verify our thesis seeing that the downtrend is broken and a new trend is forming. Again, we observe the stock breaking above key levels of resistance and key moving averages. We have upside Fibonacci targets to the $195 area; we are just waiting for confirmation with a breakout above $160. Volume has also been rising as the stock has bottomed and momentum indicators on a longer timeframe continue to show strength. Lastly, on a relative basis, we see OC is breaking out above the State Street SPDR S & P Homebuilders ETF (XHB) showing its strength within the sector. These are characteristics that make me very bullish. The long term Lastly, let’s back things out to a monthly chart to see where we stand. We see the stock was under tremendous pressure from its peak in 2024. It has formed a formidable uptrend from its anchored VWAP from the Covid lows of 2020. Now it has formed a strong base at these levels and is finally turning higher. Again, it has captured key moving averages on all time frames and is flashing a long-term buy signal with a positive MACD crossover. This solidifies the thesis we have on both the near term and the intermediate time frame as well. Risk/reward From a risk/reward perspective this is a trade that takes time. We love the upside potential here on all time frames versus the downside risk of the stock breaking below the $130/$145 level. A break below that area may change our thesis and we would revisit the trade under $120. We anticipate the stock to test and eventually break above $160. That gives us upside targets to the low $190s over the next six to 12 months and an eventual run back to old highs after that. Overall, the combination of improving fundamentals could prove to be the foundation for a meaningful turnaround. Technically, it looks like that reversal is already beginning and investors may be able to insulate their portfolio by buying shares of Owens Corning. —Jay Woods, CMT with Chase Games DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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