ArcelorMittal, together with its subsidiaries, operates as an integrated steel and mining company worldwide. Its steel products include flat products, such as slabs; finished flat products, which include plates, hot- and cold-rolled coils and sheets, hot-dipped and electro-galvanized coils and sheets, and tinplate and color coated coils and sheets; semi-finished long products comprising blooms and billets; finished long products, including bars, wire-rods, structural sections, rails, sheet piles, and wire-products; and seamless and welded pipes and tubes. The company offers its steel products for steel-consuming industries, such as automotive, distribution and processing, appliance, engineering, pipes and tubes, packaging, construction, energy, and machinery industries. It is also involved in mining iron ore and coal deposits. The company’s principal mining products include iron ore lump, fines, concentrate, pellets, and sinter feed; and coking, PCI, and thermal coal. It has coalmines located in Kazakhstan, Russia, the United States, and India; and iron ore mines in Algeria, Brazil, Bosnia, Canada, Kazakhstan, Liberia, Mexico, Ukraine, the United States, Canada, Mauritania, and India.
To review Arcelor’s stock, please take a look at the 1-year chart of MT (ArcelorMittal) below with my added notations:
As you can see from the chart, MT has been trading within a narrow, sideways Rectangle for the last (4) months. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. What’s great about a Rectangle pattern is that it not only provides you with trading points of support & resistance, but it also gives clearly defined breakout & breakdown points. For MT, the Rectangle pattern formed a $16 resistance (red) and a $14 support (navy).
Chart patterns can also provide price targets. Simply take the height of the overall pattern and add or subtract that amount to or from the breakout or breakdown point to get the minimum price objective. For example, since the Rectangle pattern for MT is $2 high ($16 – $14), MT should climb to a minimum of $18 ($16 + $2) if it breaks above $16 or fall to $12 ($14 – $2) if the stock breaks below the $14 level. Chart pattern price targets are certainly not guarantees, but they are often fulfilled.
The Tale of the Tape: MT has formed a very common chart pattern know as a Rectangle. The possible long positions on MT would be either on a pullback to $14, or on a breakout above $16. The short opportunities would be at either $16 or on a breakdown below $14.
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