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Algoma Steel Group Inc (ASTL.TO) - January 29, 2024


Last week in the Daily Stock Report, we noted weakness in mining stocks with Agnico-Eagle Mines and Wheaton Precious Metals dropping down the rankings in the SIA S&P/TSX Composite Index Report. It now appears that relative weakening may be expanding out into other cyclical groups.

Steelmaker, Algoma Steel Group, Inc. (ASTL.TO) had a strong relative performance in the last few months of 2023, which carried the shares upward from the red zone to the green zone. That upward trend now appears to be over with the shares starting to fall back down the rankings, exiting the green zone and dropping into the Yellow Neutral Zone.

On Friday, ASTL.TO finished in 64th place, down 49 spots in the last month.

Candlestick Chart Completes an Island Top:

The Algoma Steel (ASTL.TO) chart shows how quickly technical signals can turn from golden to ugly.

Last month, ASTL.TO looked great, breaking out over $12.00 resistance on a breakaway gap. The ensuing advance didn’t get very far, encountering resistance near $13.50 before starting to roll down. Last week the shares staged a bearish breakaway gap, falling back under $12.00 again. This completed a bearish Island Top pattern which has left anyone who bought and held after the December breakout trapped offside.

On top of that, the shares broke down below their 10-week average which now becomes initial resistance near $12.00. Potential downside support may appear at an old resistance level near $10.50, the $10.00 round number, or the October low near $8.75.

Point and Figure Chart Signals a High Pole Warning:

This 1% chart highlights the strength of the late 2023 rally and the severity of the current bearish reversal in Algoma Steel (ASTL.TO) shares. Over November and December, ASTL.TO rallied in two big bullish high poles, breaking out of a downtrend and rallying to a new 52-week high.

That advance peaked near $13.50 and this month, the shares have gone into retreat. ASTL.TO has given back more than 50% of its previous high pole advance, generating a bearish High Pole Warning.

A close below the previous low near $10.80 would complete a pending double bottom and confirm the start of a new downtrend with next potential support near $10.30 based on a previous breakout point, the $10.00 round number, or a cluster of previous lows in the $8.75 to $9.25 range. Initial upside resistance appears near $11.85 based on a 3-box reversal, then $12.30.

With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 5 out of 10, ASTL.TO is exhibiting short-term weakness across against the asset classes.

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