Where is U.S. Steel Going?

Are you ready for some technical analysis? I hope so! On this post I have 2 graphics, #1 and #2. This is what a candlestick chart looks like. This is a candlestick chart for U.S. Steel. Graphic #1 is a time frame from the middle of October 2015 to today, May 10, 2016. Each candlestick represents 1 day. Arrow #1 is November 1st, 2015, Arrow #2 is December 23, 2015, Arrow #3 is February 24th, 2016 and Arrow #4 is today May 10, 2016. Today U.S. Steel closed at $16.61which is the top of the green candlestick at Arrow #4. I’m hoping to get into candlesticks very soon with its own page under “Educational” in the side bar of “Main Street beats Wall Street.”

The white line you see in Graphic #1 is called the “50 Day Moving Average.”

Graphic #1

 

Graphic #2 is a section of Graphic #1. Graphic #2 is a time period from April 1st, 2016 to May 6th, which is the far right end of Graphic #1. Notice there are 2 more candlesticks that should be at the end of Graphic #2 that I intentionally left out. The 2 just above Arrow #4. The 2 I left out are the long red candlestick which is yesterday, May 9th and the short green candlestick with the long vertical white line under it. This candlestick is today’s candlestick.

Graphic #2

If you have been reading my post and my “Message of the Day” recently, you know I’ve been looking for a pullback in U.S. Steel. The reason for this post is to show you what I’ve been looking at and what I’m looking at now which is giving me a different near term outlook of where U.S. Steel might be going. The 50 Day Moving Average is a tool stock analyst use everyday.

If you look at Graphic #1, from the beginning of the chart to Arrow #3, you will see that the price of U.S. Steel has been below the 50 Day Moving Average. At Arrows #1 and #2 you will see the price of the stock was going up but at the arrows the candlesticks bounced off the 50 Day Moving Average and went down. The stock was in a downward trend until it broke thru the 50 Day Moving Average about 12 days before Arrow #3. In that 12 day period the stock went up and down until it went thru at Arrow #3 and stayed above the 50 Day Average until today, May 10th. About 20 days before Arrow #3 the stock hit a low of about $6.15. From that point it’s been in an uptrend until May 6th, the end of Graphic #2.

I believed, from both looking at this chart and reading reports, after such a long run up, U.S. Steel was ready for a pullback. This belief was confirmed with what I saw in chart #2. Take a look at the 2 red lines I put on Graphic #2. They are shaped like a wedge. Please take a look at my post on May 5th, it’s titled “U.S. Steel 2 day Call.” In that post I talk about a Raising Wedge. A Raising Wedge is when you get this wedge shape indicated in Graphic #2, at the end of a long run up; which is exactly what we have in Graphic #1. The red candlestick at the end of Graphic #1, which is yesterday May 9th, is a down day that is a result of the Raising Wedge. I left it out of Graphic #2 intentionally because I wanted you to see the wedge very clearly. A Raising Wedge is a reversal indicator. This is one for the text books!

 

Where do I think U.S. Steel is going?

Picking direction is the toughest thing to do in the stock market. Any day news can come out on a stock or a sector and throw a monkey wrench into the entire Technical analysis. If no news comes out and the market move in a normal manner, I think U.S. Steel is heading up. And I own 10,000 shares to put “my money where my mouth is.” This is not advice! I don’t give advice on what to buy. I telling you what I’m doing. That’s it!

Why doI feel way? If you look at graphic #1, you will see at Arrow #1 and #2 that the price of the stock was below the 50 Day Moving Average. At these 2 points (and 3 points before this not on the chart) the price of the stock went up to the 50 Day Moving Average and bounced back down. Between Arrows #2 and #3 the price broke thru the 50 Day Moving Average. At Arrow #3 the price came down to the 50 Day Moving Average and bounced higher to stay above. It stayed above until today where it hit the 50 Day Moving Average and closed right on it, the price is slightly above. What will it do tomorrow? Will it continue thru the 50 Day Moving Average like it did about 12 days before Arrow #3 or will it bounce off and go higher like it did at the Arrow #3. If it goes thru the 50 Day Moving Average, How long will it stay below? If it bounces off and goes higher, how high will it go? Tomorrow is a big day for U.S. Steel, and for my 10,000 shares.

Any questions on this post please send me an email.

Steve

The Options Coach