The company warned that it will report a fourth-quarter loss, expecting to lose $1.15 a share. That’s well below analysts’ expectations, which called for a loss of 62 cents.
Further, the company announced it will suspend share repurchases while slashing the dividend 80% from a nickel to 1 cent a share.
The news is grim, and while the stock is down almost 9% on the news the charts don’t look as bad as one might expect. Still, with a market that continues to grind to new highs and with plenty of others stocks displaying strength, U.S. Steel simply isn’t worth the risk.
Let’s look at the charts.
Trading U.S. Steel Chart
While the charts for U.S. Steel don’t scream “panic,” they certainly don't favor the bulls.
Above is a daily chart, that highlights X stock floating in no man’s land. The stock was trending higher in a rising channel (blue lines), but was struggling to break above the 200-day moving average. Given the strength in the broader market, bulls may have eventually seized control of U.S. Steel shares if Friday’s news hadn’t come along.
In any regard, the move thrust shares below the 20-day and 50-day moving averages, below channel support and below $12.50. If - and this is a big if - bulls can reclaim the 50-day moving average, then perhaps shares can retest prior channel support near $13.50.
But waiting for the stock to reclaim a key level first is important, because buying now is too much of a wild card.
On the weekly chart above, investors can see that $14 has been resistance this quarter. With Friday’s pullback, X stock is sitting right on the declining 20-week moving average and just above the $11.60 to $12 area.
A continued move below this area puts the backside of prior downtrend resistance (blue line) on the table, as well as range support near the $10 level.
Perhaps down near range support, U.S. Steel stock will be more attractive. But based on the current charts and when taking the rest of the market into consideration, shares are simply not attractive near current levels.
Bulls either need a cheaper price or have to see some upside momentum in U.S. steel before it becomes more attractive.