January 25th, 2006

Steel Stocks

Steel representatives have been notably absent from the IBD 100 list for a very long time (NUE and PKX were frequent members prior to 2005) yet, my guess is that they will reappear soon.

My reasons are that 1) the Steel Producer Industry Group has stealthly moved up in ranking among all the groups:

List Date Rank
July 29, 2005 134
August 30, 2005 139
September 30,2005 25
Ocotber 28, 2005 52
November 25, 2005 54
December 30, 2005 6
January 20, 2005 11

Jim Cramer made negative comments on a couple of steel stocks either on his radio or nightly MadMoney TV show until he started making positive statements about US Steel (X) at the beginning of December (“next to oil it is now one of the commodities in shortest supply”).

I was relatively uninterested in the group because there was so much tradable action in other areas (semi’s, internet, Japan, etc.) until a couple of industry members popped up from my Price Trigger Watchlist. Here’s a rundown of the stocks that have, or are most likely to soon, breakthrough resistance trendlines:

  • AK Steel (AKS) – see chart: had a false breakthrough at the beginning of 2005 of a resistance trendline at 14.5. Through the remainder of the year, it formed a consolidation channel between 6.6 and 9.6 through which it broke through yesterday (1/24/05) with a 27.8% gap move.
  • Mittal Steel Company NV (MTL) – see chart: is the case that proves the point that industry accounts for a large percentage of a stock’s price action. The MTL chart looks uncannily similar to the previous AKS chart.
  • Nucor (NUE)see chart: broke out early( in November) because of it’s large following among traders and may be a leader and precursor of how other stocks in the industry will fair in the near term.
  • Oregon Steel (OS) – see chart: perhaps the best of these four, from a chart perspective (although a little late to catch the actual breakout), OS had a resistance trendline at it’s all-time high of approximately 29 that stretched back through the whole 1990’s. It was able finally to breakthrough during the rally at the beginning of this year and is now forging ahead to all-time high new territory. The current group strength may help it penetrate some resistance at 39 dating back to 1990.

Subscribe below or click here to learn more about help for navigating turbulent markets.