Watching Three White Soldiers Morph into Terminators

• Posted by Greg Harmon
• on May 19th, 2011

About a month ago steel stocks looked ready to melt down into a Scrap Metal Heap (link below). But now they are slowly starting to form up out of the puddle of metal like that liquid metal Terminator chasing John Connor. The three below are at the end of that metamorphosis from falling to consolidating and finally reversing higher.

Mechel Steel Group, ticker $MTL

Mechel Steel Group is up off of the bottom and completed a bullish Three Advancing White Soldiers pattern. it is not too late to get this to work for you though as it is just approaching previous resistance at 26.86. If it can get through that then it has resistance higher at the 200 day Simple Moving Average (SMA) at 27.30 and then the 28.03 Fibonacci level and then 29.10. The Relative Strength Index (RSI) is rising and the Moving Average Convergence Divergence (MACD) indicator is just crossing bullishly positive. A stop can be placed just under the 25.96 Fibonacci level.

US Steel Group, ticker $X

US Steel Group is not quite a bullish as it pulled back slightly Thursday. But it has a MACD that is crossing up and a RSI that is trying to lift up off of the mat. If it can continue higher then it has resistance in the 47.50 to 48 range followed by 50 and 52. Use 44.40 as a stop, the base of this move higher.

Olympic Steel, ticker $ZEUS

Olympic Steel is also moving higher. Although the candle Thursday was a Solid Black candle, indicating bearish intraday activity, it finished near the 50 day SMA higher. It has a rising RSI and a MACD that crossed bullish a couple of days ago, supporting more upside. Resistance to the upside comes first at 31.20 then 32 and 35. It also has an awesome ticker ZEUS. It is pretty thinly traded though and as a disclosure, I did buy this stock Thursday, although about 50 cents higher than the opportunity available now. My stop is under the last higher low and you could use that or 30 on an entry Friday.

Building a Steel Base or Scrap Metal Heap

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