During Thursday's "Mad Money" program on CNBC, our own Jim Cramer spent time talking about tariffs and steelmaker Nucor (NUE) . Even the supposed winners from President Trump's tariffs don't appear to be winning, Cramer told viewers last night. That fact seemed very evident with NUE. The tariff on steel was the first of many for the President. At first NUE told investors that tariffs would be good for business.
But as the full impact of the tariff set in, Cramer continued, three things became clear:
First, a 25% tariff on steel reduced demand for steel. Second, the escalating trade war is adding new barriers to global trade. And third, the price increases are being felt by companies and consumers alike. Jim admitted that he's been wrong to recommend NUE thus far, as it's the wrong time in the business cycle to invest in steel and the trade wars are only complicating matters even further.
Let's check the charts and see what they say about the course of prices.
In this daily bar chart of NUE, below, we can see that prices made their zenith back in January. Prices over the next several months swung up and down in a tighter and tighter trading range - look up the word "triangle" in the dictionary.
Prices cross above and below the 50-day and the 200-day moving averages many times (trading range markets chew up moving average traders). As we entered October the prices decide to trend lower. The slope of the slower-to-react 200-day moving average line turns negative.
The daily On-Balance-Volume (OBV) line shows peaks in January and February followed by a slow decline as sellers of NUE slowly liquidate longs.
The Moving Average Convergence Divergence (MACD) oscillator crosses above and below the zero line many times but this month it clears goes into sell territory.
In this weekly chart of NUE, below, we can see that prices are now below the declining 40-week moving average line telling us that the longer-term trend is down.
The weekly OBV line looks like it has weakened the past four months telling us that sellers on this longer time frame have become more aggressive.
The weekly MACD oscillator has now moved below the zero line for an outright sell signal.
In this Point and Figure chart of NUE, below, we can see a bearish downside price target of $48.76.
Bottom line strategy: NUE has made a significant top formation from January to September. An initial decline to the $45 area looks possible now. Get out of the way.