Time to short US Steel (X)?
-Dow Jones, Nasdaq, and S&P 500 indices have all made gigantic run from low.
- Dollar already at all time lows, possibility of strengthening. Strong dollar = sharp correction in commodity and raw material prices.
- Much better Steel values in the market (PKX, MT, ATI, RS etc) All which seem to still have room to run.
- All indicators are maxed out and beyond.
-Commodities bubble?
- Euphoric buying for the past week with no meaningful pullback.
- Long way down from support lines
- Decreasing bid volume
- Jim Cramer have been raving about this stock. As unbelievable as it may sound, when Cramer calls a stock to go one direction, it usually travels the opposite way.
- Already $10 above its 52-week high
US steel has been a stock that has underperformed the market for quite some time before this past couple months where it rose from a pullback level of 107 to 135. It has gone up 30 straight points with only one small pullback (indicated by the last 9 candles, where 8 were white and only one red). Although X has now gone to territories never before seen, parties like this usually come with painful and sharp corrections (just look at SWC).
Opinion: Just like the other stocks I've covered, this one is no different. Stocks do not go up in a straight line no matter how great the underlying company is. This is now a great opportunity to short anywhere above $135. Stop loss at $142 (I say 142 because I believe X could top at 140 I would not want to get shaken out of my hand if it does get there). Target for cover inbetween the middle bollinger band and the 50DMA. Notice everytime when X sold off it always retraced back to at least its 50DMA. That puts the cover target at $110-115
= $7 dollar downside, $25 per share upside potential profit sold short. 2 week target. I will most likely initiate a short position on any strength it exhibits tomorrow (4/3/2008) if the Research in Motion earnings give the markets an early boost.
-DL
1 comment:
Nice to see someone pick up on the steel bubble. I bought some puts (April 135's). Maybe I'll buy some more if X isn't going to be down Monday Morning (rumour to buy ATI). Let's see, but definitely more risk to downside. Especially since stock has been pumped by Cramer. It's a commodity play, if oil goes up X goes up.
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