Important price levels on stocks aren’t perfect. Stocks can find support and/or resistance anywhere and at any price. However, when writing these articles, I highlight only the levels that appear MORE important than others. Although anything can happen between, above or below these levels, it is at the important ones where the trades should be more probable.
ArcelorMittal is a global steel producer. During the year 2010, ArcelorMittal had steel shipments of approximately 85 million tons and crude steel production of approximately 90.6 million tons. ArcelorMittal produces a range of finished, semi-finished products and flat products including sheet and plate, long products, including bars, rods and structural shapes, and stainless steel products. The company operates in five segments: Flat Carbon Americas; Flat Carbon Europe; Long Carbon Americas and Europe; Asia, Africa and Commonwealth of Independent States, and Distribution Solutions.
Before discussing the potential trading opportunities with MT (ArcelorMittal), please review the 1 yr. chart of MT that I have outlined below, with my added notations:
MT has created a very important support level at $15 (navy) over the last 3 months. In the process, the stock has commonly found resistance at $20 (red). Even though the stock has had other support and resistance points, for example at $17 and $18 (purple), the more important levels have been at $15 and $20. MT is currently trading in between those levels and now appears to be on its way back up to the $20 level.
The Tale of the Tape: MT is trading between (2) important price levels at $15 and $20. A rise to the $20 resistance would be a great opportunity to enter a short trade, while a break above that $20 could be a nice long trade. A trader could also enter a long trade on a pull back down to the $15 support, or a short trade on a break below the $15. Everything else in between is noise at this point.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT