This Chemical Stock Could Burn Bulls, Says Analyst

LYB is staring up at familiar resistance

Jul 19, 2019 at 1:56 PM
facebook twitter linkedin


The chemicals sector appeared near the bottom of our internal Sector Scorecard this week, with the average 52-week stock return in the sector coming in at negative 13.3%. Nevertheless, most analysts remain bullish on the group. However, that could be starting to change, with Cowen and Company issuing a warning on the sector, and J.P. Morgan Securities slapping LyondellBasell Industries NV (NYSE:LYB) with an "underweight" rating.

Specifically, Cowen pointed to challenging market conditions for the sector, predicting contracting margins over the next six months. Meanwhile, J.P. Morgan Securities reinstated coverage on LYB with an "underweight" rating, and cut its price target to $80 from $95 -- just above yesterday's close of $77.75. The analyst attributed the negative note to demand headwinds and pricing concerns for the petrochemical concern.

LYB shares were last seen 0.3% lower at $85.43. The security has added roughly 15% since touching a nearly three-year low of $73.94 in late May, but has run into a familiar wall at its 200-day moving average. This trendline acted as a ceiling for LYB back in April, too. What's more, the overhead $88-$90 region acted as resistance for the shares earlier this year, and could resume that role.

LYB stock chart july 19

Despite the equity surrendering more than 20% in the past year, five of 12 analysts maintain "buy" or better opinions, with not a "sell" in sight (until today). Meanwhile, the consensus 12-month price target of $100.57 represents a premium of nearly 17% to LYB's current price, not to mention the stock hasn't explored triple-digit territory since October. Should the shares once again backpedal in the face of familiar resistance, more negative analyst attention could exacerbate selling pressure on LyondellBasell stock.

 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Stock Pick Report
 


 


 
Special Offers from Schaeffer's Trading Partners