Libbey (LBY)

Company

"Libbey is the leading producer of glass tableware in North America. Through its Syracuse China and World Tableware subsidiaries, it is a leading provider of ceramic dinnerware and metal flatware to the foodservice industry in the United States. In 2002, the Company made two important acquisitions: Libbey expanded its offering of foodservice supply items by acquiring Traex, a recognized supplier of plastic foodservice products. The Company also acquired Royal Leerdam during 2002, one of the largest glass stemware producers in the world. In January 2005, Libbey completed the acquisition of Crisal located in Marinha Grande, Portugal. Crisal manufactures and markets glass tableware, mainly tumblers, stemware and glassware accessories, providing an expanded presence in Europe. Crisal's products complement those of Royal Leerdam located in the Netherlands. Royal Leerdam and Crisal are important additions to our growth strategy to be a supplier of high-quality, machine-made glass tableware products to key markets worldwide." (company website)

Buy

5-Oct-06. Libbey is coming off a 52-week low in July, spurred upward, no doubt, by the last earnings report (see sidebar). The 1-month moving average is climbing steeply, and the 50-day moving average is following along. The 200-day moving average is still falling, but at a slower rate.

• Price momentum (PPO) — picked up over three month period, but has slacked off during recent pullback
• Trend (ADX) — very strong, and buying pressure (+DI) is comfortably above selling pressure (-DI)
• Money flow (CMF) — strong inflow
• Relative strength (RSI) — steady strengthening over last three months
• Volume — a bit weak, and average daily volume fell over the three month period

Reading all of the above, I should be optimistic about LBY. Unfortunately, when I expand the horizon to 2- and 5-years (sidebar), LBY is still in a long-term downtrend. This may be the start of a comeback, but this stock is going to need very careful watching. There is a lot of headroom to reach the long-term resistance level, but I certainly wouldn't want to bet on LBY breaking through it.

Sell

31-Oct-06. I bailed out of LBY because it has just been going sidewise since I bought it, and the chart is weakening. Volume is dropping; momentum (PPO) is slowing; relative strength (RSI) is waning; and the stochastic RSI is making a series of lower peaks, on the way to being oversold for the third time in two weeks. None of these is a good sign. The only good sign is the brisk flow of money into LBY.

It's true that LBY is still above its 50-day moving average, that is rising sharply, but combination of so many signs of weakness with the narrowed Bollinger bands makes me leery.