Dow Chemical (DOW) Stock Charts Show 50% Upside - TheStreet

NEW YORK (TheStreet) -- Shares of Action Alerts PLUS holding Dow Chemical (DOW) - Get Report stumbled this summer, but like a strong athlete, DOW has quickly recouped and is knocking on new all-time highs.

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DOW made a small top formation in June and July and then skidded down to $36 from above $52 in a few short weeks. Oddly, you can see a death cross occurred near the bottom. A death cross is when the 50-day moving average crosses below the longer 200-day moving average.

There was a retest of the August low at the end of September and then a rapid rally back to $52. The On-Balance-Volume (OBV) line is moving up strongly and supports or confirms the advance.

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In this longer-term view of DOW, above, we can see that prices are testing resistance in the $50-$55 area. The OBV line is positive on this timeframe and prices are above the 40-week moving average. In the lower panel, we can see that the Moving Average Convergence Divergence oscillator has crossed from below the zero line. For aggressive traders this can be another buy signal.

If DOW can push out to a new high, the price targets using either this bar chart or a point and figure chart measure to the $70-$75 area.

Separately, TheStreet Ratings team rates DOW CHEMICAL as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate DOW CHEMICAL (DOW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity and increase in stock price during the past year. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 46.7% when compared to the same quarter one year prior, rising from $937.00 million to $1,375.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, DOW CHEMICAL has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • After a year of stock price fluctuations, the net result is that DOW's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: DOW