LSB Industries (LXU) gained a new "buy" recommendation (overweight) by a sell-side firm Tuesday. The chemical maker is a supplier to world's mining, agricultural, and industrial firms. Let's check out the charts and indicators to see how we might trade it.
In the daily bar chart of LXU, below, we can see a strong rally into April followed by a correction into July. Prices have firmed in recent weeks and now trade above the rising 50-day moving average line and the positively sloped 200-day line.
The On-Balance-Volume (OBV) line was steady from April as prices corrected lower. This is a bullish divergence and suggests that the shares fell "of their own weight" and sellers were not aggressive. The Moving Average Convergence Divergence (MACD) oscillator has narrowed but still remains above the zero line.
In the weekly Japanese candlestick chart of LXU, below, we see a mixed picture. Prices have edged back above the rising 40-week moving average line. The candles are positive with a number of recent lower shadows telling us that traders are rejecting the downside.
The OBV line is a problem as it remains in a downward trend, telling us that sellers remain more aggressive than buyers. The MACD oscillator is poised to cross to the upside for a cover shorts buy signal.
In this daily Point and Figure chart of LXU, below, we can see a potential upside price target in the $23 area.
In this weekly Point and Figure chart of LXU, below, we can see a slightly higher price objective of $24.
Bottom-line strategy: Traders could go long LXU at current levels risking to $13. The $23-$24 area is our price target for now.
