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Stelco Holdings Inc (STLC.TO) - February 5, 2024


SIACharts’ relative strength rankings help investors manage risk by identifying stocks and sectors which are underperforming relative to their peers and/or their benchmarks and should potentially be avoided. Staying away from stocks that are not attracting capital can help investors to avoid areas at higher risk of absolute declines and relative underperformance and to reduce negative event risk.

While the recent spotlight, particularly this earnings season, has been on technology stocks, traditional deep cyclical sectors have been troubling, including Energy and Materials. Steelmakers are one of the groups that have been tumbling down in relative strength ranking tables lately.

In the January 20th edition of the Daily Stock Report, we highlighted relative weakening in Algoma Steel (ASTL.TO) which has continued to trend downward. Stelco Holdings (STLC.TO) has also been under pressure, falling 17.0% in the last month, compared with a 1.0% gain for the S&P/TSX Composite Index.

Last week, Stelco dropped out of the green zone of the SIA S&P/TSX Composite Index Report for the first time since November. On Friday it dropped deeper into the Yellow Neutral Zone falling 22 spots to 88th place, down 76 positions over the last month.

Candlestick Chart Falls Away from Fifty:

Stelco (STLC.TO) finished 2023 off with a strong charge to the finish, posting gains in 8 of the last 10 weeks of the year and rallying from near $30.00 toward $50.00. 2024, however, has been a different story. Since running into resistance near the $50.00 round number and peaking at a lower high, STLC.TO has been backsliding, falling back into the low $40s and taking out its 10-week moving average. Five straight weeks of declines indicates that the shares have come under distribution.

Potential downside support tests appear near the $40.00 round number, then around $34.00 followed by trend support near $30.00. Initial upside resistance appears at the 10-week moving average near $46.00.

Point and Figure Chart Breaks Down:

Stelco (STLC.TO) was looking good at the end of last year with a spread triple top, a small correction and a double top combining into a bullish catapult. Since the beginning of this year, however, the wheels have fallen off the bandwagon quickly. At the start of the year, STLC ran into a brick wall of resistance near the $50.00 round number, setting a lower high and have been reeling backward since then.

Last week, Stelco took out its December correction low, completing a bearish Double Bottom breakdown and confirming the start of a new downtrend. Next potential support appears at previous lows/highs near $37.00, followed by $34.85 based on a horizontal count and the October low near $30.35. Initial resistance on a rebound appears near $45.15 based on a 3-box reversal.

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, STLC.TO is exhibiting short-term weakness across the asset classes.

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