Are Steel Stocks Ready to Rollover?

It has not been wise betting against steel stocks, but there may be a low risk short setup forming. Let’s take a look at the chart of AKS, which is representative of many steel stocks (MTL, ZEUS, X).

The first thing that concerns me is that RSI has made a lower high while price reached new highs. This is a negative divergence.

While the obv indicator is still strong, volume has printed a couple of distribution days, which are high volume days of negative price action. Also, postive volume has not outpaced the negative days.

Finally, stochastics point to an overbought market.

I am not saying the long steel trade is dead. No major resistance points have broke. I do think steel is ready to at least pullback, which could provide a short term, low risk short opportunity. Low risk in that you can place your stop just above the recent high, keeping the loss at about 3 percent.

Note that I am not taking this trade and am only pointing out a scenario that I am watching. I am about 65 percent short right now and don’t feel like increasing that number.

One thought on “Are Steel Stocks Ready to Rollover?

Add yours

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Blog at WordPress.com.

Up ↑

%d bloggers like this: