Domtar Is Dipping Below Support

Published on Monday, 21 May 2012 05:28 Written by TradersHuddle Wire

New York, May 21st (TradersHuddle.com) - Shares of Domtar Corporation (NYSE:UFS) closed the trading session at $76.56 below calculated support at $78.52. The stock broke down technically, raising concerns as the move might trigger additional selling.

Domtar Corporation (NYSE:UFS) produces uncoated freesheet paper. The Company manufactures business papers, commercial printing and publication papers, and technical and specialty papers. Domtar manages forestland in Canada and the United States, and produces lumber and other wood products.

Domtar's stock was trading in a well defined range with support at $78.52 and resistance at $100.6; given that this range was broken traders will be closely monitoring the stock's price action for clues of direction.

From a technical perspective, it can be expected that previous support becomes resistance, as the new range gets defined. However, $78.52 will remain in focus as Domtar's price action places the stock near the broken support. Traders will be waiting to see if it can bounce back and return to its previous range.

Traders wanting to establish a short position in Domtar can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $78.52. However, if traders want to build a long position, the best entry point to do so is when the price action takes the stock back to calculated support.