Friday April 21st- STEEL SPARKS

If you were reading the ‘comments’ or the chat area yesterday,  there was a lot of talk about STEEL and the STEEL STOCKS, so Fridays report will discuss that area and some probable trade set ups in that area and other areas.

STEEL – We’ll start with STEEL itself. We have a weekly reversal and a swing low has formed on the daily chart.  After the long multi-month consolidation, the weekly RSI is again above 50% and the Stochastics has reached an oversold level.  This all looks good.

STEEL DAILY – The daily chart had a nice bullish push higher too, and right off of the 200sma.

From what I was reading in the comments section, some readers have already entered CLF, X, and maybe a few others.  In todays report, I am just going to review some of the charts of  STEEL stocks and see if the bullishness showing up  there too.

STLD – This weekly chart does look Bullish, and it actually looks a lot like Silver itself.  After months of consolidation,  it offers a low risk entry, with a stop below the weekly low.

X WEEKLY– A reversal on the 40 MA offers a low risk entry too, but do you see on the chart where I’ve drawn ” Are we here, here, or here?” –  I am pointing this out because many seem to think that from here all the Commodity or steel stocks will just rip straight up higher.   I will discuss this subject further on in the report.

So along with this report comes my infamous “Lesson” at the end  🙂  This lesson will take a closer look at the daily chart of “X”.   Now let’s continue with a few more Steel stocks .

AKS WEEKLY –  AKS broke down below 50ma, but it has reversed and closed back above it for now.   I love this wedge pattern actually. I have traded many descending wedges and they are pretty reliable when they break out higher. This has been oversold  for weeks.

AKS DAILY  – Rising MACD and a nice 8% pop. It will probably stall at the 50sma if it breaks out, but a run to $8.50 is still a nice trade, and it can continue higher after it breaks out.

SHLO – What an amazing run this one had from January to March. Now we see a possible wedge and a drop of 50%. It bounced off of the 50sma and this is LOW RISK, with a stop under that 50sma.  My biggest complaint?  Only 57,000 in volume??

CLF – We have traded CLF here and made good money on it in early 2016, but lately it has been selling off.  The drop from February to now has actually cut cliff in 1/2 in just 2 months.  OUCH.  It also broke below the 30weekly MA, former support.  It raises concerns, but it is still a low risk buy on this reversal with a stop below the weekly low.   Lets look at the daily.

CLF DAILY – So CLF overshot the landing at the 200sma here too. I see a GAP from November and it reversed off of that gap.  WILL IT FILL THAT GAP  or is this done selling?  That remains to be seen. Thursdays POP is only as good as the one in March off of the 200sma, but there was no follow through then and it dropped further.  We’ll have to see what happens. The 200sma may stall the advance.  Is CLF really ready yet? It is too early to know, but a push to the 200sma is likely.

SID DAILY – SID is a funny stock. Last year it ran from 75 cents to $4.00,  then it sold off relentlessly.  THAT sell off  in May 2016 looks very similar to the one that we just saw.  Back in June it then doubled out of that low and currently conditions are fairly similar.  Let’s take a closer look…

I was tempted to take a position on the reversal, but there have been other reversals with no follow through too.  No sign of strength yet, so it would be basically trying to ‘catch the bottom’.   I couldn’t find recent earnings, so I am going to wait & watch this one for some follow through & strength.  Maybe a close above the 8 sma will lure me in.   SID is on the watchlist at this point.

THE LESSON

I thought that we should discuss catching the lows of a sell off and expectations, since I am hearing that “Steel bottomed and these are rocketing out of the lows”.   They might do that like they did in November, but that remains to be seen, so let’s temper expectations a bit with a simple realistic review.

X WEEKLY AGAIN –  Many see a reversal like this on a supporting moving average and think that we go straight up from here.  Yes, we COULD do that, but we must also be prepared for other possibilities.  Let’s look at the daily too. 

 ‘X’ – US STEEL DAILY chart  – I look at this and I  immediately see that the last time ‘X’ landed in the area of the 200sma after a steep sell off, it didn’t just reverse &  launch straight up. It bounced along the 200sma 3 times.  Please see the chart below and we’ll  discuss what this might mean today …

X DAILY–  So yes, this can just blast off higher, but I want everyone to know that this also could play out the way I drew it here, since this is what it did in September and October.   I see roughly 5 nice days higher and then it rolled over in both Sept & Oct.   When I take a trade like this, you may recall that I buy heavy at support and sell some  ( maybe 1/3) at the first POP of 4 or 5 days.  In the chart below, selling after the first 5 days higher in Sept  and in Oct off of the 200sma was smart.  The patient ones that could just BUY with a stop in Sept and hold for 2 months during the choppy bottoming process were definitely rewarded. That’s just an idea of how I see things.

Conclusion of this lesson:  It is often good to look at these different possibilities and prepare for them mentally.  If they bounce around and get choppy in a bottoming process, at least you’ll be prepared to ride that bull.  IF the lows are in, BUY & HOLD may be best for the long run, and 6 months from now these could be MUCH higher.   How they get there is another thing.

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So this is your STEEL and STEEL STOCKS review.  They have been selling off and consolidating for most of 2017, but we may be seeing signs of bottoming and possible attempts to move higher again.  I mentioned recently that when we have very ‘boring choppy markets’ and ‘sell offs and consolidations’,  it can lead to good trade set ups.   We may be starting to see this happen now. Maybe VALE, CENX, AA, and a few other commodity stocks will also bottom.  The set ups are low risk if you use and honor your stops.  Enjoy your Friday trading and your weekend!

~ALEX

MORE TRADE IDEAS

Earlier this week I mentioned that CGIX & XOMA were bullish and I did put a weekly chart in my report.  I added to my CGIX position and this is why I see it as bullish…

CGIX –  Back in March when positioning in CGIX, I was saying how I liked the weekly base and it reminded me of NAK. I bought it under the 50sma ( under $2) and  we waited for the POP.  After it  POPPED over that 50sma, it was an all out BUY. A POP & RUN started as shown below, here it was now $2.50.  I still own some, and I know that a few others do too, so this is an update..

CGIX is now at $4.00 after a small consolidation and looks like it may do another leg higher.   I know this sounds crazy, but a measured move target of a 1 to 1 move would lead it to about $7, so I added to my current position. Let’s look at the daily chart…

NOTE:  CGIX is a biotech stock and they can have added risk, but the set up encouraged me to add.  It may double top, it may break out and run like XOMA has been doing.   XOMA breaks out & then drops to the 20sma, repeat repeat.

NAK – NAK is popping and bouncing along.  Thursday had the look of a bullish engulfing, but it sold off a bit into the close. I still own it and like it, but THIS is an example of what you might get buying  X or CLF on a POP out of the bottom.  You get an initial POP and it may or may not keep running higher.

AMD – The NASDAQ & Tech Stocks have been strong.  AMD is a low risk buy with a stop here, and it has been acting perfectly for over a year.

TTWO –  I mentioned TTWO breaking out 2 days ago in the comments. It looks very legitimate and is following through. There are 2 reasons why I am showing this now.   1. TTWO runs well, but just in case it ‘back tests’ , you can put it on a watch list  ( this type of break out can just keep running however) . 2. The next chart is similar, but not as extended.

JBL – Breaking out and not as extended as TTWO, so it could be bought here, as long as you know that it MIGHT back test.  Look at the last 2 times JBL broke out – it did not back test, it just ran higher.  Consolidations and choppy trading often lead to excellent trade set ups and I really like  AMD, TTWO, JBL, CY, MU,  and a few more in the TECH SECTOR.

SSYS WEEKLY-   I posted that I have liked the bases and set ups in 3-D printer stocks lately.  They were once  LOVED, then hated. Now?  They are bases and look to be breaking out.  This was  SSYS, I mentioned that DDD, VJET, XOME are in this category too.

VJET – About to break out with swelling volume?  It is a low risk try in my opinion, with a double bottom low and a rising MACD.