Shares of building materials company Martin Marietta (MLM) - Get Martin Marietta Materials, Inc. (MLM) Report were under heavy pressure last week. By the close Friday, the stock was off over 5.5% for the week, putting it on the top-10 losers list in the S&P 500. MLM began to weaken immediately after its fourth-quarter earnings report last Tuesday, after opening the session with a downside gap. As the week came to an end, the stock remained range bound, but was on the edge of a breakdown.
Martin Marietta staged a massive breakout Nov. 9. The stock surged more than 11.5% that day as upside volume jumped to its heaviest level in years. This powerful move came just a week after the company staged a much smaller, yet more important, earnings-inspired breakout on Nov 1. MLM extended the post-election surge only slightly, but considering shares, had risen more than 27% from its Oct. 31 close; a consolidation was not a surprise. MLM held in a healthy sideways pattern for the next 10 weeks as it digested the big November move.
Late last month, MLM appeared headed for a fresh rally leg after the stock's news-inspired breakout on Jan. 25. One week later, this bullish move failed. MLM has been drifting lower since and is in danger of more loses. A key area in the near term is the December/January lows. If this support zone, which runs from $219.00 to $216.00, is clearly taken out, a mountain of supply will be left behind. All of the post election buyers will be staring at loses.
For patient MLM bulls, a further selloff will create a low-risk entry opportunity for this A-rated stock. A major support zone is in place between last summer's highs and an upward sloping 200-day moving average. Also in this area is the massive post-election breakout gap just above $202.00. If the stock can regain its footing in this zone, between $206.00 and $201.00, MLM investors should take advantage.