08 March 2007

making the case for shorting steel

steel has been one strong sucker lately, but i believe we can see some cracks in its armor (no pun intended). please consider the following and then get back to me... thanks.

AKS
  • first check out the crappy gapping around here at the top in the red circle. tops are often plagued by squirrelly action like this
  • for the last few days or so, notice the negative divergence between price and volume - as price is gapping up, the volume is decreasing
  • with an indicator like rsi, we like to see the rsi go up with price, and a divergence like in this case often signal tops, or temporary tops before pullbacks, corrections, or what have you

ATI
  • check out the red circles - they show ATI making a new high on horrible volume
  • the blue circle shows that same crappy gapping
  • finally, with both volume and rsi, we see negative divergence with price

X
  • green circle shows bounce off of short term trend line; however, the red circles highlight falling below that line and then 2 failed attempts at breaking back above it before gapping down
  • the purple circles show new high on horrible volume
  • don't forget the crappy gapping in the blue circle
  • and finally don't forget your negative divergences

3 comments:

Pradeep Bonde said...

Risk in shorting steel is in mergers and acquisitions. You never know which company wil be bought on Monday.

walter said...

do you mean that steel is slated to go thru some kind of M&A phase? or just in general, there's always the risk of being bought?

Pradeep Bonde said...

Most of those stocks are running because of M&A rumors.