During Thursday's Lightning Round segment of Mad Money one caller asked about Nucor (NUE) . "Nucor is coming back. It sells at just five times earnings. Hold onto it," was the advice from Jim Cramer.
Let's pay a visit to the charts of this U.S.-based steelmaker.
In the updated daily bar chart of NUE, below, we have a learning moment. Prices have corrected to the downside in recent weeks and are trading below the 50-day moving average line. Some analysts may be turning bearish but if they just stood back and looked at the price action more and the indicators less they would see that the shares are trading above the last low in July. The pattern of higher lows and higher highs is still good -- we still have an uptrend. This condition could change but it is valid at this time.
The trading volume has been a bit heavy the past two months but the On-Balance-Volume (OBV) line has only declined modestly, in my opinion. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line but narrowing.
In the weekly Japanese candlestick chart of NUE, below, we can see the past three years of price action. Here too we have another learning moment. The chart currently shows a gap to the downside. Normally this price void or gap would be considered bearish but the candle pattern shows us a lower shadow which tells us that the lows are being rejected. A bar chart would not give us that extra information. The 40-week moving average line has a positive slope.
The weekly OBV line shows a small decline after a long and strong rise. The MACD oscillator is pointed down but still stands well above the zero line.
In this daily Point and Figure chart of NUE, below, we can see that prices have reached and exceeded a downside price target in the $101 area.
In this weekly Point and Figure chart of NUE, below, we used close-only price data and a five-box reversal filter. Here we get a price target in the $155 area.
Bottom-line strategy: In our last review of NUE back on Aug. 11 we wrote that "Traders should raise stop protection to $104 from $99. Our targets are $143 and then $180." Traders who did or did not raise stops would have been stopped out. Dust yourself off and repurchase NUE again but risk to $89 now. Our price targets remain the same for now.
Note: Getting stopped out is risk control and is sometimes frustrating. This does not mean that trading or investing without stops is a better idea.
