The bull train continues to roll ahead as generally upbeat corporate earnings haven’t given investors enough reason to take profits off the table. Major equity indexes have yet to deviate from their steep upward trajectory since the start of 2013, with the Dow Jones Industrial Average and S&P 500 both posting fresh five-year highs and breaking past their psychologically significant 14,000 and 1,500 levels respectively. Amid the improving sentiment on the equity front, commodity prices have been all over the board, making it even more frustrating for those still waiting on sidelines to jump in; some are hesitant to go long given the stellar gains year-to-date on Wall Street, while others are fearful of missing out on the next bull market [for more market news and analysis subscribe to our free newsletter].
Chart Analysis
For the many investors facing this dilemma, the United States Steel Corporation (X) presents an attractive opportunity in the current market. Shares of this steel producer are severely beat down from a long-term perspective, which should ease the concerns of those who believe that equities are extremely overbought now. Furthermore, X’s current technical set-up offers an attractive low-risk entry point along with the potential to capture profits from any big move to the upside over the coming weeks. Consider X’s one-year daily performance chart below.
Click to Enlarge
Since bottoming out at $17.67 a share on June 12, 2012, this stock has been trading higher within a fairly well-defined price channel (blue lines). Notice how this stock has a tendency to rebound higher as it nears the bottom support line, while also pulling back when it trades along its upper resistance line. Given that X is trading right above its 200-day moving average (yellow line) and is near the bottom of its channel, entering into a long position at current levels is attractive; traders have the opportunity to closely manage downside here while also favorably positioning themselves for the next up-leg [see 5 Commodity Trading Mistakes You Could Be Making].
Outlook
U.S. Steel Corp. recently settled above its 200-day moving average, which may deter conservative investors who prefer stocks with more established uptrends. On the other hand, the company did beat its most recent earnings estimate, which may hint at its return to profitability. In terms of downside, this stock has support around $22 a share followed by the $20 level; when considering the potential upside, X will likely face serious headwinds as it nears resistance around $26 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.
[...] Editor’s note: This article by Stoyan Bojinov was originally published on Commodity HQ. [...]