United States Steel Corp. engages in the manufacturing and selling of steel products. It operates through the following business segments: Flat-Rolled Products, U.S. Steel Europe, and Tubular Products.
Take a look at the 1-year chart of Steel (NYSE: X) with the added notations:
During the past five months, X had formed a very important level of support at $10 (red). Last week saw the stock break below that support. Not only did that imply lower prices for X, but the $10 area will now likely act as resistance on future rallies.
The Tale of the Tape: X broke a key level of support at $10. A trader could enter a short position on any rallies up to or near $10 with a stop placed above the level. If the stock were to break back above the $10 level, a long position might be entered instead.
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