US Steel Melts Resistance

Jun 23, 2008: 11:39 AM CST

US Steel (X) broke a resistance level today, which could signal higher prices yet to come for this basic materials sector stock.

Daily chart:

Although momentum seemed to be diverging, the indicator broke a trendline just ahead of the eventual price break above the $185 resistance zone.  The stock has had an impressive run over the previous three sessions, and bulls were finally able to drive price through this zone with little resistance.  Volume increased on the prior two sessions, hinting that the upper resistance level had higher odds of ‘melting away’ than holding.

The stock could find resistance at the $200 (round number) per share level, but otherwise there seems to be a clear pathway to that level now that overhead supply has (apparently) been resolved.

Note:  The Blue arrow in the middle of the chart represents a high probability swing or position trade, in that the stock had performed a momentum trend move (evidenced by the new momentum high) and then retraced back to the rising 20 period moving average.  With a stop just beneath this average, an entry close to the average, and a target well beyond (or, in the case of a position trade, exiting when price does break this average convincingly), this would be a good example of a high probability trade with potential edge over time.

Basic Materials/Industrials have been strong through 2008.  Will they continue to be so?

US Steel (X) is the top metals fabrication company by market cap, at $22.22 billion.

Other stocks in the Metals Fabrication Industry – ranked by market cap – include:

Precision Cast Parts (PCP)
Reliance Steel (RS)
Valmont Industries (VMI) – profiled recently on the blog
Matthews International (MATW)

Source:  Yahoo Finance


2 Responses to “US Steel Melts Resistance”

  1. BOTD Says:

    goldman loves X , we own AKS ….hmmm..c’mon STEEL pinaction!

  2. Richard Says:

    Yes US steel, X, is classified as a metals fabricaor, it is also a steel company, and steel followed coal, KOL, which followed oil, USO; so part of US Steel’s rise was being pulled higher by oil.

    US Steel’s rise was especially strong because it is a proxy for the dollar; the dollar’s rise, helped US Steel rise 4.5%, to the steel sector 1.38% rise.

    Another part of US Steel’s strength comes from what is likely the final day, or so of use of yen carry trade financing for investing long stocks, which I give a great deal of attention to in the linked article.

    So I believe the positives we are seeing in US Steel are false buying signals; the price rise is simply do to a finale yen carry trade frenzy buying.

    US Steel, X, represents an outstanding short selling opportunity.