U.S. Steel (X) added to Goldman Sachs Conviction Buy List ~ market folly

Monday, June 23, 2008

U.S. Steel (X) added to Goldman Sachs Conviction Buy List

Fresh off my post on steel the other day, Goldman Sachs comes out today and adds U.S. Steel (X) to its Conviction Buy List, boosting its price target to $228, up from $210, noting that higher steel prices should obviously benefit them. The stock is up 3% or so today at $190 and is breaking out to new highs. This could very well be the catalyst needed to really kick the steel names into another gear. Or, it could very well be the near term top haha. The action in steel has been puzzling the past few days. I had started a position in SID because I wanted more steel exposure, but was quickly stopped out a day later as it broke through the 50 day moving average. I am now playing X as its chart is holding up quite nicely and is the stereotypical momentum trade setup. Again, I'm not trying to trade steel, I want to own some of these companies. But, at the same time, the market is shoddy at best and the technicals are not all that great. So, I've got to pick my spots. X, MTL, and SID are all steel plays worth monitoring. I'd rather be in the emerging market steel names, but the charts are telling me to play X at the moment. And, this is exactly why incorporating technical analysis into your investment style is beneficial.

So, today on the Goldman Conviction Buy List add, I'm in X with a protective stop just under $185. That was the overhead resistance that had been causing X problems and so if it breaks back down below that, its heading lower. Again, I want to highlight that you have to treat this as a momentum trade because that's what it is and that's why its breaking out. I want exposure to steel as an investment, but most of the charts suck right now, except for X. So, in the mean time, I'll play X as my steel play until the other stocks in the sector start to show signs of life. This type of market is all about adaptability and playing what's working and shorting what's not.


Wei said...

Does the Goldman Sachs Conviction Buy List only available to their own clients?

Brian said...

Let's hope that the financials and the retailers that Goldman just reversed on big-time weren't on that list! At least they were man enough to admit that they were wrong.

If you're interested in steel, you may also want to look at Nucor (NUE). It doesn't give you the emerging market play, but it has made some nice acquisitions lately to help it in the scrap recycling arena. This should help it to offset the higher price of iron ore. NUE just bounced off of its 50 day MA after a bit of consolidation and it looks like it was up on the Goldman X upgrade today as well. This is more of an investment name for me, especially with its dividend, but you may be able to play it as a trade as well.

j. (marketfolly) said...

thanks for the comment Brian. Yea I'm very familiar with NUE... looks decent on the chart and you're right, solid dividend.

actually, GS removed NUE from the conviction buy list today and added X in its place it looks like. They still have a 'buy' rating on NUE, but its not longer on the prestigious conviction list. I'll continue to monitor NUE as well but anything you think that gives them a comparative advantage over other steel plays? I'm investing as well rather than trading, but I'm bouncing around sticking with relative strength in this shoddy market, essentially waiting it out while the real plays i want get their act together.