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Tackle Today: Top Down Analysis in Action

July 29, 2021

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In last night’s Trade Masters, I took spectators on a brief tour of the metals & mining space while showing them how to perform top-down analysis properly.

First, I identified that the S&P Metals & Mining ETF (XME) was pushing toward overhead resistance at the top end of its trading range. A push above it would signal this cyclical area was returning to favor.

Second, I showed how the steel stocks, a sub-section of XME, had already broken above their 50-day moving average and recent trading range. See the Vectors Steel ETF (SLX) for proof.

Third, I spotlighted Nucor (NUE) as a tempting target among specific steel stocks. It sailed through its just-released earnings report and delivered the goods. Heck, the last four quarters of EPS show massive growth: 63 cents, $1.30, $3.10, $5.04. MY OH MY! Its stock price just peaked its head above the 50-day and is trying to break through critical overhead resistance. The breakout pattern is what prompted my bull put spread trade idea.

In summary, we have a leading stock (NUE) in a leading sub-industry (SLX) of an industry (XME) that is showing bullish reversal signs.

What’s not to like?


Chart of the Day

Will Nucor Breakout?

Last Monday’s gap lower was a ruse! A bear trap, as we like to say. And now, NUE is itching to break the topside of its range. If it does, a return to $110 looks likely.

Video of the day

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