Buy the Lennox Stock Breakout

Lennox International (LII) designs and manufactures a variety of heating, cooling, and refrigeration systems, and the company has been a beneficiary of the strength in the housing market.

The stock price did see a pullback in October, but after a brief period of consolidation, it looks ready to resume its long term uptrend.

The daily chart shows the advance off the February low at the beginning of the year, segmented with a period of horizontal channel consolidation from April to May, followed by a return to the earlier trend, and then a second period of channel consolidation in September and October.

A channel breakdown took the stock back down to a 38% Fibonacci retracement of the 2016 range, which is also the intersection of the 200-day moving average and the top end of the first channel pattern. It has been forming a base above this reinforced level of support, in the form of a small inverse head and shoulders pattern with neckline resistance in the $147.50 area. In Monday's session it was able to break through and close above the neckline and on its high.

The stochastic oscillator has moved above its center line and moving average convergence/divergence made a bullish crossover, signs of positive price and short-term trend momentum. Accumulation/distribution has crossed above its 21-period average, and the money flow index moved out of an oversold condition and is above signal average.

The stock is a long candidate at its current level, using an initial percentage stop under the pattern neckline.

This article is commentary by an independent contributor. At the time of publication, the author was long LII.

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