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Finance

Is ArcelorMittal Ready to Breakout?

ArcelorMittal SA (MT) is involved in the steel industry and generates most of its revenue from its Europe segment. This segment produces hot-rolled coil, cold-rolled coil, coated products, tinplate, plate, and slab. These products are sold primarily to customers in the automotive, general, and packaging sectors.

In the most recent quarter, sales were strong, driven by higher average steel selling prices and higher iron ore prices and shipments. The company is expanding its steel-making capacity and focused on shifting to high added value products. For instance, it is looking to expand its automotive steel line of products.

MT had $5.5 billion in cash on hand as of the most recent quarter. This is almost twice the amount of short-term debt the company holds. The company also has a low debt-to-equity ratio of 0.3. Analysts forecast a 71.5% year over year rise in sales in the current quarter. Earnings are expected to soar 1,100%.

MT appears very underpriced with a trailing P/E of 12.58 and a paltry forward P/E of 5.32. The stock has shown mainly bullish momentum since last July leading to a Momentum Grade of B in our POWR Ratings system. This is reflected in the chart below.

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Take a look at the 1-year chart of MT below with added notations:

 Chart of MT provided by TradingView

With the exception of a larger pullback to start 2021, MT has been rallying nonstop up until running into the $34 level (red). That mark is also preventing the stock from hitting new 52-week highs. MT has dropped back recently, but a solid close above that $34 level should lead to much higher prices for the stock.

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MT has a 52-week resistance at $34. The possible long position on the stock would be on a breakout above that level with a stop placed under it.

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MT shares fell $0.65 (-2.15%) in premarket trading Thursday. Year-to-date, MT has gained 29.80%, versus a 12.85% rise in the benchmark S&P 500 index during the same period.

About the Author: Christian Tharp

I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More…

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