AK Steel Holding Corp. a speculative buy

Apr 18th, 2016 – 1 Comment

Looks like AKS has more to offer for those with an appetite for risk


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Hi Lou,

Can you please tell me where the stock AK Steel is heading from here, will it get back to its previous high?

Thanks,

Wayne

 

Hey Wayne,

 

Thanks for the assignment. This will be my first inspection of the particulars surrounding AK Steel Holding Corporation (AKS NYSE). The company was founded in 1899 and now operates eight steel plants, two coke plants, and two tube plants across six U. S. states.

The company produces flat rolled carbon, stainless, and electrical steel products used in the automotive,  infrastructure, manufacturing, construction, electrical power and distribution markets.

Slowing growth in China has been the fly in the ointment for the steel industry as producers from the Middle Kingdom have flooded the world with output no longer needed in the domestic market. Whenever you have slack demand and excess supply you get lower prices that challenge many producers to the point where they seek merger opportunities or protection from their creditors.

A positive factor in the case of AKS is that it produces value added steel products which meet the specifications of their clients as opposed to an indistinguishable commodity with no pricing strength. They do however use older technology which burdens them with higher production costs.

An examination of the charts will add context to your evaluation of this stock.

 

AKS

The three-year chart depicts the breakout from the decline that started in late August of 2014 when the shares were trading near $11.50. The all time high for the stock is over $71.00 which goes back to 2008. At this point in time it looks like a great march to the 2008 highs would be asking for a lot.

What is evident is that in 2016 AKS bounced off its 52-week low and has broken above the downtrend line as well as resistance along the 50 and 200-day moving averages. In addition there is a golden cross that formed in late March of 2016. Finally make note of the resistance that has come in near $5.00.

 

AKS2

The six-month chart provides a close up of the buy signals generated by the MACD and the RSI in late January of 2016 as AKS moved off its 52-week low of $1.64. From a technical perspective it looks like AKS is offering a trade for those with an appetite for risk. Keep in mind that the company will be reporting its quarterly results later in April. Make sure to post an alert in your calendar and track how the stock trades leading into the release.

 

Next time I will audit the charts of Atlantic Power Corp. (ATP TSX) for Dave.

Make it a profitable day and happy capitalism!

 

Categories: Steel
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