Signs of Life from a Breakout in US Steel X

Jul 30, 2014: 11:58 AM CST

Is it possible that US Steel (X) is finally catching a bid from a breakout (and reversal pattern) from a long-term resistance level?

Could this be the start of a new long-term uptrend in price?

Let’s take a look at the Weekly and Monthly Chart to give us some clues for a longer-term play.

First, let’s start with the long-term “Rounded Reversal” or Saucer Reversal pattern that has developed since mid-2011 to present (mid-2014).

Note the lengthy (multi-year) positive momentum divergence into the April 2013 low near $16.00 per share.

Lengthy positive divergences tend to precede – though not guarantee – long-term trend reversals.

On the swing up (and doubling in price) toward $30.00 per share, we saw volume and momentum surge with price (which is bullish).

So far, 2014 treated traders to a sideways consolidation, but buyers broke price above the $30.00 per share level and then the more important $32.50 level which is not only a multi-year resistance ceiling, but moving average resistance on multiple timeframes (including the 200 week SMA at $29.39).

The suggestion is that buyers can trigger a trend reversal via a breakout as price trades through “Open Air” above $33.00 per share.

The weekly chart suggests price could trade into the prior high shy of $50.00 per share.

The Monthly Chart actually paints a very interesting landscape to plan longer-term positions:

Price just broke above the falling 50 month EMA at $31.50 and may be trading through “Open Air” toward the $40.00 per share level (or higher).

While we do see the potential for additional bullish action in price, I did want to draw your attention to a brief educational lesson for traders of parabolic moves.

I just posted two updates on current “parabolic arc trendline” patterns you can review:

“Are You Following this Parabolic Arc Pattern in INTC?”

“Interesting Arc Pattern forming in Harley Davidson (HOG)”

US Steel (X) created – and then broke through (reversed violently) – a Parabolic Arc pattern into the 2008 market peak.

Price then collapsed violently from $190 all the way down to the $20.00 per share level in a devastating liquidation sell-off.

No, not all “arc” patterns end like this but it highlights the risk in chasing high-flying stocks that develop parabolic (or exponential) arc patterns like this.

Anyway, X may not be the day-traders’ first choice but investors and longer timeframe swing traders can continue watching for a possible continuation move up and a potential trend reversal higher through “Open Air” as shown on the Weekly and Daily charts.

Finally, any “Bull Trap” that triggers with a collapse back under the breakout trendline would invalidate the potential for an upside breakout (always plan alternative scenarios).

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Corey Rosenbloom, CMT
Afraid to Trade.com

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2 Comments

2 Responses to “Signs of Life from a Breakout in US Steel X”

  1. Shlomo Fingerer Says:

    Thank you Corey!

  2. Ponting Says:

    I feel it’s way too dangerous for comfort to trade in these sorts of situations, so I rather feel it’s better ignore or avoid rather than take chance with a risky trade. I am fortunate enough that my broker is OctaFX which has rebate service where we are able to earn up to 15 USD per lot size trading, it is equal to the 50% spread that we have to pay so it’s a really wonderful advantage we receive by this option!