Celanese Corporation: Shares defining bullish "cup & handle" formation

Celanese Corporation (NYSE: CE) is engaged in the production and sale of industrial chemicals. Its primary operations include the manufacture of building block substances like acetic acid and vinyl acetate monomers. The firm's products are used in the manufacture of such diverse materials as paints, adhesives, textiles, solvents, filter products and food sweeteners. Celanese operates primarily in North America, Europe, and Asia. The The Blackstone Group L.P. (NYSE: BX) is a major owner.

The company pleased investors earlier in the month, when it said it anticipated fiscal year (FY) 07 EPS of $3.26 to $3.31. Analysts had been expecting $3.21. Management also issued FY08 EPS guidance in-line with the Street view. Among the developments Celanese cited in support of its outlook were the launch of acetic acid and emulsions units at its Nanjing complex. The company also announced plans to add a polymer compounding unit at that location. The news popped the shares out of an early December "cup" into the late December "handle" of a Cup & Handle formation. The price is now showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle".

Brokers recommend the issue with four "strong buys", five "buys" and two "holds". Analysts expect a twelve percent growth rate, through the next year. The CE Price to Sales ratio (1.01), Price to Cash Flow ratio (12.80), Price to Free Cash Flow ratio (30.54), EPS Growth rate (48.73%) and Return on Equity (32.46%) compare favorably with industry, sector and S&P 500 averages. Over the past twelve months, CE has traded between $24.50 and $44.77. A stop-loss of $37.00 looks good here. Note that the firm is expected to release Q4 results in early February.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.