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Trading down since March, is now a good time to buy Norbord?

Hi Lou: I have read your January, 2013, comments regarding Norbord. I bought it recently at approximately $33. Now it is trading around $28. Do you think it is a good buy? Wilson

Thanks for the assignment. This will be the second time that I undertake a study of Norbord Inc. The last was on Jan. 16, as you cited. At the time shares were trading for $28.84 and Tom wanted to know if the stock had built a big enough base to make the case for a buy. The research conducted on Tom's behalf indicated that shares had broken the uptrend line and looked to be taking a breather. It was advised to be patient to see if Norbord could shake off the sellers and begin a new advance. In hindsight that was the right call. Norbord moved sideways building a base until late February when it made a quick two-week run to its 52-week high of $37.93 on March 15. But that was the end of the line in terms of sustained forward momentum.

An examination of the charts will add to your understanding of the technical indicators in play with Norbord.

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The three-year chart illustrates a stock that has been trading in a gentle down channel since it hit its 52-week high in March. There is also a double top that has surfaced as the second lower high formed in June. A double top is a pattern that points to the end of an uptrend. In addition, Norbord has breached the 50- and 200-day moving averages. All of these indicators are calling for increased investor attention and caution.

In the January analysis it was identified that the stock had made an aggressive run from the late-2011 bottom but had not built much support along the way. With the break below support at $30 and the test of support at $27 in August, it would appear there is a long way to fall if $27 is breached.

The six-month chart offers a number of additional signals worth mentioning. The MACD and the RSI both provided strong signs that the top was in by mid-March and as we came into early August the momentum indicators once again generated a sell signal. Finally there is a death cross forming that should not be ignored.

Norbord is not providing sufficent evidence to suggest that selling pressure has abated and I would advise you to seriously review your position.

Make it a profitable day and happy capitalism!

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