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Chartology: Buy Steel & Sell Market?

Find out why chart expert Dan Fitzpatrick thinks steel is a winning sector in a losing market.

Fitzpatrick is Co-Contributor and Technical Analyst for TheStreet.com as well as President, StockMarketMentor.com. Following is a summary of his main points.

Chart:DJ U.S. Steel Index vs. S&P 500
Analysis: The Steel Index and the S&P 500 have been in sync since 2003 and have only recently diverged, explains Fitzpatrick. It looks as if the Steel Index remains strong, while the S&P 500 is wallowing in a downtrend. I anticipate domestic steel will become more attractive as the cost of importing steel soars due to the falling dollar and rising energy prices, he adds.

Chart:AK Steel
Analysis: The technical picture looks very good to me, says Fitzpatrick. I see consolidating in a tightening range with room to run heading into earnings on April 22nd. It’s a buy, he concludes.

Chart:Steel Dynamics
Analysis: This chart exhibits a different type of consolidation than AK Steel – with lower highs and higher lows on decreasing volume, however, it too is a buy, he says.

The Bottom Line: It's not too late to buy domestic steel stocks, according to Fitzpatrick, the underlying dynamics are still in place and won't be going away anytime soon. As long as the dollar remains weak, steel stocks should remain strong.

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