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Is LyondellBaseel Industries A Buy?

11/25/14 06:12:15 PM
by Koos van der Merwe

The LyondellBasell Board recently authorized an interim dividend. Is this a trigger to buy the stock?

Security:   LYB
Position:   Buy

On November 12, 2014 LyondellBasell (LYB) announced that it would be paying an interim dividend of $0.70 per share to shareholders of record November 24, 2014, with an ex-dividend date of November 20, 2014. At the time of writing (November 20, 2014), the share price is up 1.34% as new buyers bought the share. To be a shareholder of record by November 24, 2014 buyers have to purchase the share at least three days before that date, the strategy being to then sell the share for a capital gain before November 24. Does this strategy always work? No, because many traders will push up the share price and sell the share the day before the dividend is paid, namely December 8, 2014.

Figure 1. Weekly Chart With Elliott Wave Count. The share price is moving into a Wave 5 with a target of $137.92.
Graphic provided by: AdvancedGET.
The chart in Figure 1 is a weekly chart with an Elliott Wave count suggesting that the share price is moving into a Wave 5 with a target of $137.92. The PTI of 64 (probability index) and the relative strength index (RSI) suggesting a buy means that this rise in the share price is possible.

Figure 2. Daily Chart. Here you see how price fell from a high of $115.49 to a low of $81.16.
Graphic provided by: AdvancedGET.
The chart in Figure 2 is a daily chart showing how the price fell from a high of $115.49 on August 29, 2014 to a low of $81.16 by October 15, 2014. Since then the share price has risen and on November 20, 2014 broke above the JM Internal Band suggesting a buy. The JM Internal Band is a simple 15-period moving average offset by 2% positive and 2% negative. A move above the upper band suggests a buy signal, and below the lower band a sell signal. Note that the RSI has also suggested a buy.

Figure 3. Omnitrader Chart. Would you be a buyer?
Graphic provided by: Omnitrader.
The chart in Figure 3 is an Omnitrader chart that brought the share to my attention. On November 20, 2014 the share price triggered a buy signal as shown on the Vote line, the result of The Red Green Strategy Long 6, the Red Green Strategy Long and the Red Green Strategy Long Stop. The Advisor rating shown on the chart is 53, not as strong as I would like it to be. Do note the volume. Volume strengthened as the share price corrected and fell as the share price strengthened. This suggests weakness.

I would be a buyer of LYB shares to collect the dividend, but I would be a seller of the share three days after I buy it and hope that it continues rising. My stops however, would be close.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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