Is Steel The Real Deal?

Are you positioned for a global economic recovery? One way to do this is to have some exposure to the steel sector. As the economy grows, this will spur demand for all things composed of steel. Economic growth will help demand for real-estate, cars, and machinery. Also, in the steel sector is considered a leading indicator of capital spending and economic growth, so you will want to take advantage of this sector early.

One way you can invest in the steel sector is through the NYSE Arca Steel Index, or through the Dow Jones Steel Index. The Dow Jones Steel Index was strongly higher this week, closing above a 38.2% fibonacci resistance level. The next major resistance, 50% resistance level stands at 338, which is nearly 16% above current levels. More importantly, the relative strength completed a bottom formation this past week (point 1) as it moved above resistance at line a. The strength in this industry should have positive implications for the economy as a whole.

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A nice steel stock is Steel Dynamics (STLD) which has also broken out upwards on the weekly charts, closing well above the September highs at $18.56. Strong resistance at the 38.2% retracement fibonacci level been overcome the next major resistance is at $23, nearly 15% above current levels. If the rally from point c is equal to that from points a to b, the target is at $26, with the 61.8% resistance at $28.50. First good support is at $16.50, with major support at $13.50. The OBV has overcome its major resistance (line 1) at point d, and is not far below the highs made in 2008. This suggests the breakout is valid. Other steel stocks you should consider are: AKS, WOR, and NUE.