In his "Executive Decision" segment of Mad Money Tuesday night, Jim Cramer spoke with John Ferriola, chairman, president and CEO of Nucor Corp. (NUE) . NUE is a manufacturer of steel products, with operating facilities primarily in the U.S. and Canada. NUE shares are off 8% since President Trump first enacted tariffs on imported steel to help the U.S. steel industry.
Ferriola explained that tariffs are not driving the steel industry, but they are working as intended. He said steel imports have fallen and demand for domestic steel is rising, which is good news for the domestic steel industry. Let's check on the charts and indicators of NUE this morning after the midterm elections.
In this daily bar chart of NUE, below, we can see a long sideways trading pattern from December to early October, with prices moving in a tighter and tighter range. Prices broke out to the downside in October but they have since recovered pretty much back to the breakout point.
The pattern is a little unusual in that volume and the On-Balance-Volume (OBV) line did not decline through the pattern. A tighter and tighter trading range means that there is less and less opportunity to make money -- and that typically drives volume to other stocks that are trending. The daily OBV line stays relatively firm from January to near the end of October and then it has started to rise.
This movement of the OBV line suggests to me that holders of NUE did not liquidate or sell their positions, and more-aggressive buying has developed in the past two weeks. In the lower panel is the Moving Average Convergence Divergence (MACD) oscillator, which crossed to the upside for a cover-shorts buy signal.
In this weekly bar chart of NUE, below, the consolidation on the daily chart (above) becomes easier to understand. The 2018 pattern now looks similar to the consolidation pattern in 2017. Prices are just below the declining 40-week moving average line and a test of that line is probably going to happen today and this week.
The weekly OBV line has been neutral for the past twelve months and the MACD oscillator has begun to narrow towards a possible cover-shorts buy signal.
In this Point and Figure chart of NUE, below, we can see both an upside price target of $74.72 and that there is overhead chart resistance from $63.50 to $68.
Bottom line strategy: With mixed technical signals and a modest upside price target of around $75, I am not in a rush to jump into a long position on NUE. If you decide to approach NUE from the long side, I would recommend a stop just below $56.