What's the deal with steel?

Analyst coverage is increasing at research firms as speculation about the bottom of share prices looms.

By Benzinga Mar 7, 2013 1:28PM
Nuts and Bolts copyright Andrew Bret Wallis, Photodisc, Getty ImagesBy Tim Parker

Is steel a steal? If prices for the metal really are at a near-term bottom, then now might be a good time to consider adding some cold, hard steel to your portfolio. 


Longbow Research showed an interest in the sector on Wednesday and initiated coverage on four companies in the steel industry and upgraded another.


If you're into that sort of thing, there are plenty of articles that will take you through the fundamentals. Basically, if you're looking for companies with a lot of debt, less than impressive margins and price-to-earnings ratios so high that you scratch your head and ask why, you're in the right place.


But maybe these companies look better from a technical perspective. Let's see what the charts say about a few of the ones that Longbow now has its eye on:


First up is Nucor (NUE). It's one of Longbow's favorites. They initiated coverage with a "buy" rating.


At the beginning of December, Nucor started an impressive move to the upside -- nearly 20%. This caused a breakout through the upper trend line of the ascending channel only to sell off modestly soon after.


Then came a retest that formed a double top. The stock failed and sold off to the tune of 9%. The stock has since recovered, breaking through its 50-day moving average (DMA) on Wednesday. The stock looks ready to retest the $48.23 top.


How about Steel Dynamics (STLD)? If you bought this name back in June when it underperformed the S&P by as much as 25%, you'e feeling good about your stock-picking abilities right now.


It's up 48% since its bottom and recently, a buying opportunity presented itself. Sell volume dried up causing the stock to shed 12% while still holding the lower trend line of the ascending channel. It's currently testing the 20-DMA but the selloff might entice new buying interest if the broader market remains risk-off.


Finally, the company that gets the most press in the steel industry, U.S. Steel (X). If you're a volatility trader, look no further. Wild price moves aside, the name has only barely formed an ascending channel over the past six months -- a red flag in a market that won't do anything but keep rising. After a large gap higher at the beginning of the year, the stock plunged, breaking through its lower trend line in February.


For now, this is a broken stock. U.S. Steel is below its 20, 50, and 200 moving averages and in a three-month downtrend with sell volume showing no signs of drying up. Its next chance of gaining some momentum comes at the 200-DMA at $21.39 and then a test of the lower trend line right around $22.


More from Benzinga
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

118
118 rated 1
270
270 rated 2
472
472 rated 3
714
714 rated 4
624
624 rated 5
608
608 rated 6
623
623 rated 7
445
445 rated 8
319
319 rated 9
125
125 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
BIDUBAIDU Inc10
BMYBRISTOL-MYERS SQUIBB CO.10
CELGCELGENE CORP10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.