Chemicals Giant Tronox Ltd (NYSE:TROX) Breaks Out, May Resume Uptrend

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Tronox Ltd (NYSE:TROX), a global chemicals manufacturer of titanium dioxide (TiO2) and natural soda ash, has broken out of a four-month old rectangular pattern, and may resume the uptrend that it began in late June 2016.

The stock surged 11.15% Tuesday to close at $10.67, on volume of 2.05 million shares.

Technically, Tronox has reversed the downtrend that it commenced in September 2014 after it formed the bullish reversal pattern known as an inverted head-and-shoulders.

On the weekly chart this pattern is clearly visible with the left shoulder formed in October 2015, the head in March 2016 and the right shoulder in July 2016. The neckline of the pattern lies at $8.00 or thereabouts.

The stock penetrated the neckline in August, and thereafter entered a period of sideways trading. It broke out of this pattern yesterday.

Currently, Tronox is trading above all three moving averages namely the 20-day, the 50-day and 200-day lines.

Tronox Ltd (NYSE:TROX) reports a mixed third quarter

For its third quarter Tronox reported EPS of $-0.34 which bettered estimates by $0.03, and revenue of $533 million, which missed by $38.05 million but was down by 7.3% year on year.

The quarterly result on November 3 sparked a rebound in the stock from the lower (support) line of the aforesaid rectangle.

Tom Casey, chairman and CEO of Tronox, said (extracts):

  • “We delivered strong adjusted EBITDA and free cash flow performance in the third quarter.
  • Our TiO2 business generated additional momentum in the quarter to that generated in the second quarter, driven by higher pigment sales volumes and selling prices on both year-on-year and sequential bases coupled with continued strong operating cost performance.
  • Pigment selling prices increased by 6 percent sequentially and were 1 percent above the prior-year quarter. This increase marks the first time since the third quarter of 2012 that pigment prices were higher on a year-on-year basis.
  • Our Alkali business returned to adjusted EBITDA and free cash flow levels that overcame and exceeded the series of one-off items that impacted results in the second quarter.”

The company had $202 million of cash as at the end of the quarter, and total liquidity of $470 million.

It declared a quarterly dividend of $0.045 per share to shareholders of its Class A and Class B shares.

On November 7, Tronox Alkali Business increased the prices of its U.S. Pharmacopeia (USP) and Industrial grade sodium bicarbonate products by $15 per ton, Free On Board, Green River, Wyo., USA.

Tronox is on the upswing, both fundamentally and technically.

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