Steel, aluminum and other metals have been a strong a performing sector these past few months. AA, X and AKS have all appeared to break out of a pretty strong accumulation phase. AK Steel Holding Corporation (AKS) is a lower priced stock that traveled from $4.00 in November, 2013 to over $8.00 just a few weeks ago.
I’m no math wizard but that is a solid 100% gain in stock price is just weeks! Granted, it is easier for a cheaper priced stock to have those kinds of moves. If we look back at September of 2013 we can see where the move began.
AKS closed above the 200-simple moving average and closed above the strong $3.80 resistance level. In the early part of November AKS had a gorgeous break away gap and $4.73 became a very strong support. And from there… “boom goes the cannon” one may hear me say from time to time.
In the past two to three weeks AKS has had a very nice and sizable retracement and correction. It traded down, very close to the 100 simple moving average (which is the blue line in the image). Then, on January 28th it had one of my favorite types of candles. This long day white candle opened and closed above the prior days close, with terrific volume, I might add. As I am writing this January 29th has an inside day candle, which would technically create a 2 day pennant pattern.
If AKS closes above $7.27, a bullish perspective on this stock would make a lot of sense and hopefully make you a lot of cents! HA! See what I did there? Anyway, a terrible joke aside, the old adage says to buy low and sell high.
This is a good opportunity to buy a stock that has good upside potential. The indicators show the stocks bullish momentum has now rested, allowing for plenty of buying pressure to come in. $9.25 is a solid first target and a stop could easily be placed at $6.23, giving this a nice 1:2 risk/reward ratio. The $9.25 price range in the past shows a lot of congestion.
So AKS would likely slow down there for a few days to weeks. Therefore, a covered call could be sold there while allowing the stock to regain its bullish momentum. If that price gets broken though, it could be a nice ride up to $14.75 filling a nice price void from a drastic and sharp selloff August, 2011. This trade could be fun and you don’t have to have a huge bank roll to play it.
Stay warm traders. It looks like February could be a cold month! I also predict the Broncos to win the super bowl. There, I said it beforehand. Ladies and Gentleman from around the world, thank you for your time!
