The Steel Revolution
The Key Charts To Watch
If you’ve picked up our weekly letters over the last month, you might’ve done very well from our work.
US Dollar Collapse - 18th OCTOBER LETTER (it collapsed)
The Rip in Copper Miners - 3rd NOVEMBER LETTER (they ripped)
The Value over Growth Debate - 10th NOVEMBER LETTER (the ratio is widening)
In this weeks letter, I’ll be covering 2 top performing areas of the market.
Steel.
Semiconductors
I’ll lay out some upside targets and a few names to consider, as well as laying out key levels in the S&P500 to watch for the rest of the week, but first, lets start with the SLX Chart.
Most of you know, I don’t pigeon hole myself as a “growth” guy, or a “value” guy… I’m just someone who likes uptrends, and my job is to identify these uptrends at the earliest possible starting point. That’s it.
The Steel Index has been a buy for our clients for a few weeks now (low end of the range) and we recently met our 24% upside target a few days ago, but as well know, patience is often rewarded in this game, and in the last 48hrs, we’ve been rewarded with a further break out in the space.
What names look interesting?
Steel Dynamics ticks a lot of boxes, just like many of the Industrial names, they have low valuations and rising earnings growth.
$17B Market Cap, Low P/E Ratio, Solid Earnings Growth, Bullish Technical Chart
If the break out above $98 holds firm, I don’t see any reason why we can’t aim for $155 as an upside objective. If the break out fails, no big deal, we can easily define the risk. That’s a risk:reward proposition I like very much.
For STLD to continue higher, you’re probably going to need to see the Steel Index to hold above the recent break out level.
Nucor Corp also ticks the same boxes but is a $36B Market Cap.
If we get above this $147-$148 level, NUE could also get interesting.
Semiconductors
There’s lots of areas moving very well just now and many areas (including areas of Tech) rebounding spectacularly.
The semiconductors is a great example of how I look at the markets. We made a bottom call on the 13th October and it’s been working well.
SMH is up 35% and many individual names are well in excess of this.
We have Uncle Warren hoovering up Taiwan Semiconductors (TSM) and we also have NVDA earnings this evening. So it’s an interesting 24hrs ahead.
For many areas though (not all areas), the S&P500 is going to be key over the next few days.
In Conclusion
How the 200 Day Simple Moving Average acts here is going to dictate a lot.
It was 1 of the considerations when I made a market top call in August, so it would be silly not to give it some weighting at current price levels.
It’s been a great month, but broadly speaking, chasing over extended names up here doesn’t make a heap of sense to me, which is why areas like Steel are more appealing at this exact moment in time.
They’re not over extended and the hope is they could just be getting started, and if they don’t get going, there’s an easy out with well placed stops.
Lets see how price reacts over the coming days.
That’s what I’ll be watching, what will you be watching?