Kronos’ Stock Chart Reflects Newly Available Shares

stencil.blog-post-feature (2)

Chemical stocks tend to be disrespected, especially when it comes to media attention. Even when they sport strong stock charts and outstanding fundamentals, chemical companies can seem like boring businesses, whose inner workings aren’t readily apparent.

But Kronos Worldwide (KRO) shows why it’s a mistake to dismiss less sexy industries, and focus solely on more glamorous techs or retailers.

Kronos uses titanium dioxide to make colorings for plastics, paper, food and cosmetics. The stock boasts strong chart action these days. It’s trending steadily higher after retreating to an  August low of 28.66, and getting renewed support at its 10-week moving average, after pulling back last week.

The stock got a boost on Oct. 18, when the company announced it would offer 7.8 million new shares, raising $317.5 million before fees. It gapped 4% higher on the news. That’s somewhat unusual, as stocks often trade lower when new share offers are announced. That’s because investors worry about their share value being diluted, and sometimes sell on the news.

Wall Street sees profit of $1.99 per share this year, with a decline to $1.69 in 2011. Declines don’t necessarily kill a stock’s upward trajectory, though, as long as they’re already baked into the price. Negative surprises, though, are often another story altogether!

Kronos pulled back in the days following that announcement, but professional investors began snapping up shares at the 10-week average, sending the stock higher again. Upside volume has been heavier than normal in the past four sessions, first after the company smashed third quarter earnings views, and investors piled in. Volume soared Thursday as the newly available shares came on the market.

You can see this movement on Kronos’ stock market chart.

Though the stock is performing well, fundamentally and technically, it’s extremely thinly traded, which warrants extra caution. It moves about 28,000 shares per day, making it susceptible to sudden sharp price swings. That works well when it happens to the upside, but it’s very easy for an individual investor to get caught in a downdraft when a thin stock sells off!