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In a bull market correction, a move below the rising 200 day moving average is usually a gift to patient longs looking for an entry. Ironically, this gift usually has many worried that is is a Trojan Horse, since bearish sentiment usually comes with price “breaking its 200 day moving average,” as the headline will usually read. In reality, the more significant technical aspect is the slope of that widely-watched reference point, with a rising 200 day moving average giving the presumption to the bulls, and vice versa for bears.
In the case of the steels, the daily chart of the SLX (ETF for the steel sector) below shows a clear corrective phase since the middle of February. The most recent leg down has been accompanied by a plunge below the rising 200 day moving average. With last Thursday’s hammer candlestick, followed by Friday’s inside day, I will be looking at the sector for a long trade this week. To be sure, we could see a battle in this area in the coming weeks or even months, as happened last summer in the broad market. That said, the first plunge below can usually be seen as a washout offering a nice setup for a reversal.
Note also the weekly chart showing us that the SLX has pulled in to a significant price area from last year. Here again, I will be looking for the bulls to step up and defend this level.
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good song
Hi C&W,
Would you consider GGB, which has taken quite a beating, or a more houselhold name like X or STLD?
TIA
zzz
all of them, frankly–but I like PKX the best