Steelmaker Nucor Is Galvanized for Another Leg Up

 | Mar 01, 2017 | 2:54 PM EST
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President Trump emphasized American steel in his address to Congress last evening. Sounds like an invitation to look at the charts of steel companies around the world. Beginning with Nucor (NUE) , let's look at the charts and indicators.

In this daily bar chart of NUE, below, we can see that prices have rallied from $40 to $68. There is a correction from July into September/October before a post-election run-up to a December high. NUE has been undergoing a correction the past three months that resembles an equilateral triangle formation.

Typically, the volume of trading diminishes through a triangle formation because the up-and-down swings become narrower and narrower and there is less and less opportunity to make money. I would not suggest that the volume has slowed but I can point out that the On-Balance-Volume (OBV) line has weakened, telling us that longs have liquidated positions. The Moving Average Convergence Divergence (MACD) oscillator recently turned up to an outright long signal.

In this three-year weekly chart of NUE, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line shows a strong rise from early 2016 and the MACD oscillator on this timeframe has corrected but it will not take much of a bullish move for the stock to turn this indicator bullish once again.

We manipulated this Point and Figure chart, below, to give us the answer we wanted. A trade at $65.43 will be a new upside breakout for NUE on this chart and open up a longer-term upside price objective of $81.

Bottom line: NUE looks like it is breaking out on the upside from a triangle formation. Traders could go long here and on strength above $66. A decline back below $60 will upset the pattern.

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