Buyers Still Attracted to Steel Maker Nucor

 | Apr 26, 2017 | 2:29 PM EDT
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U.S.-based steel maker Nucor (NUE) has performed better than some other steel companies in recent months. For the past six months dips and short-term declines below $59 have been bought. Prices are currently above the flat 50-day moving average line and above the rising 200-day moving average line.

Those two technical tools are useful but we certainly have more at our disposal, so let's take a look at the daily and weekly charts as well as a Point and Figure chart.

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In this daily bar chart of NUE, below, we can see that prices bottomed in September/October and then jumped higher in November and early December. In early November the 50-day moving average line decline and nearly touched the rising 200-day moving average. What is important about this is that we did not get a bearish death cross -- the 50-day did not cross below the 200-day. 

As noted above, NUE is now above the flat 50-day average line and nearly touched the rising 200-day line earlier this month. The On-Balance-Volume (OBV) line has moved up and down with the price action but since early February it has risen even as prices have declined. In the lower panel is the trend-following Moving Average Convergence Divergence (MACD) oscillator, which just crossed to a cover shorts buy signal from below the zero line. Crossing above the zero line, should it occur, will be an outright go long signal.

In the weekly bar chart of NUE, below, going back three years, we have more positive signals. NUE has been trading above the rising 40-week moving average line for the past year. The weekly OBV line made a low in January 2016 and is still pointed up. This strong OBV line tells us that buyers of NUE have been more aggressive than sellers on this timeframe.

In the lower panel, the take profits sell signal from the MACD oscillator in January but recently it looks like the two moving averages that make up this indicator have begun to narrow. Further, price gains for NUE could move the MACD oscillator to a fresh outright buy in the weeks ahead.

In this Point and Figure chart of NUE, below, we can see a "filtered" view of the price action the past four years or so. The more recent price action shows that NUE has found support or buyers at $57/$56. On a short-term basis a rally to $62 will improve this chart. A rally to $66 would be a more important upside breakout.

Bottom line: NUE has been in a sideways trend for the past six months but prices are getting close to the apex of this pattern and a breakout is anticipated. Because the previous trend was up before this sideways pattern developed the assumption by most chartists is that the uptrend will continue when this consolidation finishes. Aggressive traders could go long on closes above $64 and $66 risking a close below $57.

Columnist Conversations

we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
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