The steel sector in the United State has experienced setbacks lately. The classic American steel producer, United States Steel (X, NYSE), reported on June 19 that it will close two Midwestern blast furnaces. A few days earlier, its American counterparts, Nucor (NUE, NYSE) and Steel Dynamics (STLD, NASDAQ), released mediocre Q2 earnings forecasts, signifcantly lower than analysts’ expectations.
From a yearly perspective, in 2019 steel stocks as a whole sank by 40% compared to 2018 mainly due to investors’ concerns that the growing trade war between the United States and China would cause global economic slowdown and would, consequently, lower demand for steel.
Investors are now convinced that prices have reached a nadir from which they will only go up. Put it another way, the sector appears to be undervalued, enough to make it a profitable investment once again.
Last Wednesday (June 19), United State Steel surged by 6%. The day before, on Tuesday, it closed 1% higher despite issuing Q2 EPS forecast of $0.40 – 23% lower than Wall Street’s forecast of $0.52.
I would personally say don’t believe the hype, but don’t take my word for it, lets go to the charts.
Monthly Chart (Curve Time Frame) – monthly supply is at $47 and monthly demand is at $7.
Weekly Chart (Trend Time Frame) – the trend is down.
Daily Chart (Entry Time Frame) – the chart suggests to go short if price gets to the daily supply at $20 with a target at the monthly demand at $7.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.