By Gareth Soloway on April 21st, 2010 12:33pm Eastern Time
After unbelievable moves higher, many metal stocks are now seeing unique price action over the last couple weeks, going against the flow of the markets. The markets have inched higher, making a new 52 week high in the last week, but key stocks that are a solid gauge of a healthy economic rebound have stalled and some have fallen sharply. This may be as sign of trouble brewing as they can often be an economic leading indicator.
Take a look at these charts below. Southern Copper Corporation (NYSE:SCCO) topped out in January at a 52 week high of $36.29. While most other stocks have since taken out that January high in the recent stock market run up, Southern Copper has not. The stock hit a low of $30.84 today, well off that January high. This is a tremendous fall since January. Southern Copper is known as a leader, and strong price action would dictate global economic growth.
Next, let's look at AK Steel Holding Corporation (NYSE:AKS). The stock also topped out at a 52 week high at $26.75 in January and has since never even looked back. In fact, in the last two weeks, the stock has collapsed lower, hitting $18.51 today. This again does not show us a robust growth situation in the global economy which is what the markets supposedly have rallied on, over the last few months.
Stocks like United States Steel Corporation (NYSE:X), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and many other metal plays show the same chart.
In understanding how the metal stocks play a key role in showing economic growth, it leaves me to wonder if we truly do have as robust of a recovery on our hands or if it can last once the stimulus is taken away. In addition, it makes me wonder if these stocks rolling over could be a leading indicator for the markets to lose ground shortly. Join the Research Center to gain access to the secret techniques, guidance, plays and education that the hedge funds utilize to make billions.
Metal Stocks Are Getting UGLY (NYSE:FCX) (NYSE:X) (NYSE:CLF)
By Nicholas Santiago on April 21st, 2010 12:25pm Eastern Time
Most savvy investors and traders know that when the industrial metal stocks trade higher it is a sign of economic growth. The legendary trader, Jesse Livermore used to say that all houses are built with copper roofs. What he meant by that is, when copper is strong it is an indication that the stock market is strong. Therefore, when we look at the leading metal stocks at the present time there are some negative signs brewing in this market.
The first major metal stock that is acting poorly is Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX). This stock is still sharply below its January high which was 90.00 a share. Today the stock is trading down 2.00 points to 78.43. The stock will have some daily chart support in the near term from a technical oversold condition around 77.00 and 74.00. In any case this market leader has been weak and has more downside in the cards.
The next important metal stock that seems to be under pressure on the daily charts is United States Steel Corporation (NYSE:X). This stock has declined sharply since forming a recent top on April 6th, 2010 at 70.00 a share. Today the stock is down 1.24 to 57.65. The daily chart looks to have more downside to come. The stock will have some daily chart support in the near term around the 55.00 – 54.00 level from an oversold condition .
Another major market leader in the industrial metal space that is showing weakness is Cliffs Natural Resources Inc (NYSE:CLF). This leading iron ore pellet producer topped out recently around 76.00 a share on April 15th, 2010. The stock is lower today by 1.70 to 68.41. This stock will have good support on the daily chart around the 60.00 level. Although, it is weak and may still have further to decline in the near term.
The overall market indexes are still very strong and in a technical uptrend. However, these leading metal stocks are painting a different picture. We all know China is trying to cool off its real estate market by curbing mortgage lending. This could be a good reason for the pullback in these industrial metal names. If the emerging markets cool off what is left to this rally? Beware.
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