2 Reasons to Dump This Chemicals Stock

Shares of chemical concern Olin Corp (OLN) have added nearly 13% so far in June. However, the stock’s upside momentum could stall soon, if recent history is any indicator. The security is facing off against multiple layers of potential technical resistance, and could be vulnerable to analyst backlash, to boot.

OLN stock has been in a channel of lower highs and lows since snagging a year-to-date peak above $27 in February. A trendline connecting the lower highs could once again translate into a speed bump on the charts for the shares. What’s more, since its May 31 year-to-date bottom, OLN has rebounded back within one standard deviation of two formidable trendlines, after a lengthy stretch below the pair.

More specifically, OLN is back within striking distance of its 160-day and 200-day moving averages. Per data from Schaeffer’s Senior Quantitative Analyst Rocky White, over the past three years, there have been five other rebounds into the 160-day, after which OLN was lower one-month later four times, averaging a loss of 4.8%. After four other signals into the 200-day, the equity was lower a month later each time, averaging a loss of roughly 9.5%. From the stock’s current perch at $22.21, a similar drop would put OLN around $20.10.

Short sellers are certainly betting on more downside for OLN. Short interest increased 14.4% during the past two reporting periods, and now accounts for 10.8 million shares, or a healthy 6.6% of the security’s total available float.

On the other hand, analysts remain devoted to OLN, despite the stock’s slide off its February highs. In fact, nine of 12 brokerage firms maintain “strong buy” opinions, with not a “sell” in sight. Echoing that, the consensus 12-month price target of $28.06 represents a premium of nearly 27% to OLN’s current perch, and sits in territory not charted since September. Should the equity once again backpedal in the face of resistance, a round of downgrades and price-target cuts could exacerbate selling pressure on the chemical concern.