IBD 50 Stocks To Watch: Time To Sell This Chemicals Stock?

Chemicals stock Westlake broke support at its 50-day moving average, plunging more than 12% over the past three days. The sell-off triggered a sell signal. As such, this is an IBD 50 Stocks to Watch due to its troubling action.

Westlake made a pretty clear break of the 50-day line the past couple of days, according to MarketSmith. The week of June 3 was the first real sign of trouble. Westlake closed lower and near the week's lows in the highest volume since the breakout. That's a red flag.

This week, the stock fell even further. The stock had risen a lot from its 109.11 buy point earlier this year. This was a cup-with-handle entry after the sell signal that followed the previous 105.09 entry. Investors should sell before all gains are gone.

Analyst Downgrades Chemicals Stock

The building products and petrochemicals company is ranked No. 1 in IBD's basic chemicals industry group, according to IBD Stock Checkup. But the entire chemicals industry — both basic chemicals and specialty chemicals — has suffered over the past week as recession and inflation concerns echoed across the markets. The basic chemicals industry is ranked No. 29 out of 197 industry groups.

On June 3, JPMorgan downgraded Westlake to neutral from overweight, citing its valuation and increasing risks of a global economic recession. Today, BofA Securities maintained its buy rating on the stock but cut its price target to 147 from 167.

Westlake has a Composite Rating of 98 and an EPS Rating of 90. And it has a three-year annual growth rate of 52%.

Analysts surveyed by FactSet forecast the company to report second-quarter earnings of $6.26 a share on sales of $4.25 billion. Earnings are expected to be released Aug. 3.

Follow Michael Molinski on Twitter @IMmolinski