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Jim Cramer's Action Alerts PLUS

Looking at the Charts for Nucor

By Jim Cramer and the AAP Team | 2017-04-28 12:27:15.0
Stocks in Focus: NUE

As we have done in recent weeks, we like to integrate some charting analysis for members to provide a different look at the markets. While Action Alerts PLUS focuses primarily on analyzing stock fundamentals, it never hurts to look at the charts of stocks to gain another perspective. Below, we are including charting analysis of Nucor (NUE) from Real Money's technical analyst, Bruce Kamich, posted earlier this week. You can read the initial Real Money post here

Given that NUE is the newest position for the portfolio, we wanted to provide members with the technical perspective, as many investors use the charts to help inform trading opportunities. You can read our deeper analysis on the company posted earlier this week here and we encourage members to watch our members-only call from Wednesday where we discuss our NUE thesis. 

See below for Bruce's analysis: 

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U.S.-based steelmaker Nucor (NUE) has performed better than some other steel companies in recent months. For the past six months, dips and short-term declines below $59 have been bought. Prices are above the flat 50-day moving average line and the rising 200-day moving average line. 

Those two technical tools are useful but we certainly have more at our disposal, so let's take a look at the daily and weekly charts as well as a Point and Figure chart.

In this daily bar chart of NUE, below, we can see prices bottomed in September/October and then jumped higher in November and early December. In early November, the 50-day moving average line declined and nearly touched the rising 200-day moving average. What is important about this is that we did not get a bearish death cross -- the 50-day did not cross below the 200-day.

As noted above, NUE is above the flat 50-day average line and nearly touched the rising 200-day line earlier this month. The On-Balance-Volume (OBV) line has moved up and down with the price action, but since early February it has risen even as prices have declined. In the lower panel is the trend-following Moving Average Convergence Divergence (MACD) oscillator, which just crossed to a cover-shorts buy signal from below the zero line. Crossing above the zero line, should it occur, will be an outright go-long signal.

In the weekly bar chart of NUE, below, going back three years, we have more positive signals. NUE has been trading above the rising 40-week moving average line for the past year. The weekly OBV line made a low in January 2016 and is still pointed up. This strong OBV line tells us that buyers of NUE have been more aggressive than sellers on this timeframe.

In the lower panel, there was a take-profits sell signal from the MACD oscillator in January but recently it looks like the two moving averages that make up this indicator have begun to narrow. Further, price gains for NUE could move the MACD oscillator to a fresh outright buy in the weeks ahead.

In this Point and Figure chart of NUE, below, we can see a "filtered" view of the price action the past four years or so. The more recent price action shows that NUE has found support or buyers at $57 to $56. On a short-term basis, a rally to $62 will improve this chart. A rally to $66 would be a more important upside breakout.

Bottom line: NUE has been in a sideways trend for the past six months but prices are getting close to the apex of this pattern and a breakout is anticipated. Because the previous trend was up before this sideways pattern developed, the assumption by most chartists is that the uptrend will continue when this consolidation finishes. Aggressive traders could go long on closes above $64 and $66, risking a close below $57.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long NUE.

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Markets

Chart of I:DJI
DOW 20,943.58 -37.75 -0.18%
S&P 500 2,384.57 -4.20 -0.18%
NASDAQ 6,046.0418 -2.8952 -0.05%

Action Alerts PLUS Holdings

Holdings 1

Stocks we would buy right now

Symbol % Portfolio
Weighting
Industry
AGN 0.04878122943388112 Drugs
APA 0.03728782729744914 Energy
C 0.03770077698450046 Banking
CMCSA 0.028454928171243753 Media
DHR 0.03335133160342373 Health Services
FB 0.054637540604215676 Internet
GE 0.024838432069366808 Industrial
GOOGL 0.050731087546153 Internet
HPE 0.013553780733730389 Telecomm
KEY 0.008634799805432964 Banking
LUV 0.020454483176078342 Transport
MMP 0.02712941065725185 Energy
NUE 0.022300739713424205 Metals & Mining
SLB 0.03184737903947138 Energy
SNA 0.035070407648527376 Industrial
XEC 0.03530310151980233 Energy
Holdings 2

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Industry
AAPL 0.04289469355100225 Consumer Durables
ADBE 0.02680804549074145 Computer Software & Services
ARNC 0.023885534279603535 Industrial
CSCO 0.03714908494227581 Computer Hardware
DOW 0.03374762128325936 Chemicals
DXC 0.00467929349552351 Computer Software & Services
NWL 0.03291325534811267 Consumer Durables
NXPI 0.02500494110323296 Electronics
PEP 0.03299227658452373 Food & Beverage
SBUX 0.028356606817183914 Leisure
TJX 0.03725651012541526 Retail
WBA 0.025184832765846148 Retail
WDC 0.03556647529507558 Computer Hardware
WFC 0.03731714162708549 Banking