Chemtura (CEM)

Company

CEM 1-year chart CEM 1-year chart

"Chemtura Corporation, with 2006 sales of $3.7 billion, is a global manufacturer and marketer of specialty chemicals, crop protection, and pool, spa and home care products." (company website)

CEM 6-month chart
CEM 6-month chart

Sell short

Last year, I made some money and lost some on Chemtura. Happily, I made much more than I lost. When Chemtura reported earnings this month, they disappointed Expectations by a penny, and that confirmed the downtrend that had already begun. The 50-day moving average is falling, as is the 1-month average.

  • Price momentum (PPO) — losing since February
  • Trend (ADX) — strengthening, with selling pressure (-DI) above buying pressure (+DI)
  • Relative strength (RSI) — weakening
  • Volume — declining gradually

Based on technical analysis, MarketEdge calls CEM a "short candidate" in a "weak downward trend."

Buy to cover

gain Bottom line
6%

I decided to cover my short in CEM this morning. There is some very mild improvement in the chart: Volume, relative strength (RSI) and buying pressure (+DI) are all picking up, and the price has moved fairly close to the 200-day moving average, that is rising. An excess of caution prompts me to bank the gain rather than risk it testing the possibility that further decline is in the offing.