3 Specialty Chemical Stocks for the Trader’s Lab

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3 Specialty Chemical Stocks for the Trader’s Lab

The basic materials sector’s chemicals business is often eclipsed by news about the newest catalysts boosting oil and gold prices. Because of strong global growth prospects, increased manufacturing activity, rising exports, balanced chemical inventories, robust demand from end-use markets, and favorable shale gas economics, the American Chemistry Council (ACC) believes the US chemicals industry is well positioned for continued growth. Chemical output is expected to grow 3.4% in 2018 and 3.6% in 2019, which bodes good for chemical stockpiles.

Investors who wish to trade major companies in the industry may investigate these three speciality chemicals stocks that appear primed for a rise.

Founded in 1994 and headquartered in Charlotte, North Carolina, Albemarleis one of the world’s largest lithium producers. The company,with a market capitalization of $11.54 billion,sees lithium demand remaining robust due to the growth of electric cars – through their battery use. Albemarle also produces bromine – a dark toxic liquid used in fire safety chemicals, disinfectants and sanitizers. As of Nov. 5, 2018, the company’s stock has returned -15.99% year to date (YTD), but it has returned 16% over the past three months. Albemarle offers investors a 1.26% dividend yield.

Albemarle stock started to show price and volume momentum last week ahead of its earnings report, scheduled for Wednesday, Nov. 7, in which analysts expect the company to report earnings per share (EPS) of $1.25 for the quarter ended September 2018. On Nov. 1, the share price broke above a downtrend line that has remained intactthroughout most of 2018. The 50-day simple moving average (SMA) has also recently crossed above the 200-day SMA –referred to as “golden cross” – suggesting further upside price movement. Traders could buy the current breakout to ride momentum into the earnings report. A tight stop-loss order should sit below the downtrend line to protect trading capital. Consider booking profits at the $118 level, where the stock’s price should encounter resistance from the Jan. 18 gap below the 200-day SMA.

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Ecolab, with a market cap of $44.66 billion, manufactures and sells cleaning and sanitation products for hospitality, healthcare and industrial markets. The company also offers customers tailored solutions in water and energy end markets. Trading at $154.59 and delivering a 1.06% dividend yield, Ecolab stock has returned 16.13% YTD, outperforming the industry average gain by roughly 2.5% as of Nov. 5, 2018. Analysts project a 2018 EPS growth rate of 3.5% for the company.

Ecolab’s stock price has been steadily rising during the last nine months. When the firm posted mixed third-quarter results on Oct. 30, the stock gapped below the 200-day SMA, then staged a stunning intraday turnaround to end more than 1.5% higher for the day. Those looking to purchase should wait for a fall to $147.5, where the stock is expected to find support from the uptrend line that dates back to early February. Traders might put stops below the 200-day SMA and a take-profit order near $160, an area where the stock may encounter resistance from the September swing high.

International Flavors & Scents creates fragrances and flavors for food, drinks, home goods, and personal care items. The income generated by the company’s two self-explanatory areas – tastes and perfumes – is about equal. With a market valuation of $15.57 billion and a dividend yield of 2%, International Flavors & Fragrances stock has lost -2.96% for the year but is up 11% in the last three months. Analysts anticipate that the company’s third-quarter profits will be $1.54 per share.

Between February and October, the stock chart of International Flavors & Fragrances produced a large inverse head and shoulders (H&S) chart pattern. Like Albemarle, the 50-day SMA has just crossed above the 200-day SMA, indicating that price movement will be positive in the near future. Traders can look for an entry opportunity at the neckline of the inverse H&S pattern, which is presently acting as support, at $141. A stop-loss order at $130 might be placed immediately below the pattern’s right shoulder. To project a profit objective, add the distance between the pattern’s head and neckline to the entrance price ($20 + $141 Equals a profit target of $161).

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