Strong US housing data this year has seen James Hardie (JHX) maintain its uptrend. However, I have identified some technical signals which indicate that it may be time to secure our profits. Some analysts have identified headwinds such as increasing competition and demand to taper back a bit in the US. These concerns may be creeping in when we look at the price action of JHX.

The first problem sign I noticed is the bearish engulfing pattern that formed two weeks ago on the weekly chart. This is indicated by the arrow. Then last week the stock struggled to overcome the midpoint of that bearish candle. We have also seen a sell signal get triggered on the RSI (circled). Chances are JHX starts to pull back from current levels. You will notice that for the last 5 years it has respected the uptrend line drawn on this chart, so we would expect it to therefore head back to that level over coming months. This implies downside risk to about $16 – $17 which represents a drop of over 20% from current levels.

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