Kronos Worldwide Inc. in a weak sector

Jul 11th, 2012 – Comment

All of these factors suggest that you should keep your power dry and wait before jumping in.


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Hi Lou,

I have spoken to you once before regarding this stock. Following your advice, have been in and out again. Do you have any news that could explain KRO’s recent 25% fall? It looks like a “screaming” buy to me. Please advise.

Many thanks,

John

 

Hey John,

Glad that you have figured out how to ride this bronc for fun an profit. The last time I examined the case for Kronos Worldwide Inc. (KRO NYSE) was on October 24, 2011 on your request. The shares were trading for $19.01 and applying technical analysis it was observed that a pennant had formed indicating that the advance would continue until it met resistance at $22.00. Retrospectively that is exactly what transpired.

There is no company specific news that would explain the selling that has plagued the shares in 2012 but the basic materials sector it is a part of has been under pressure. A great stock in a losing sector is going to find it hard to excite buyers.

Another run at the charts may help you continue to trade this one for profits.

 

The three-year chart indicates that the stock is still in the grips of the downtrend that started in July of 2011 when it peaked at $32.50. There is also a death cross that formed in June of 2012 that must be acknowledged as a risk factor. I would have been a lot happier if KRO had held onto support at $15.00.

Now we have to hope that it can hold onto the thin ledge of support at $14.00 which adds another layer of concern. If $14.00 is breached no significant support comes in until $7.50.

 

The six-month chart is not providing much evidence to support your call for a screaming buy. There has been resistance along the 50-day moving average on efforts to move higher. In addition there is the death cross that formed last month and the inability to hold support at $15.00.

Finally the MACD and RSI are not signalling that the momentum in the stock is about to shift to the upside. All of these factors suggest that you should keep your power dry and wait before jumping in.

Make it a profitable day and happy capitalism!

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