Metals Market Shake-Up
The broad U.S. equity market experienced another “volatility event” this week, which was blamed on Covid variant worries and concerns that the Fed might begin tapering sooner than expected.
Unfortunately, some areas of the metals market were infected by the selling pressure, with particular weakness concentrated in steel and silver. Consequently, a couple of our positions were knocked out by the selling which hit our protective stops.
Our stop-loss slightly under 41.35 was triggered in Haynes International (HAYN), our main exposure to nickel and cobalt. Nickel prices pulled back 4% in the past week, while cobalt remains at a yearly high, but HAYN shares were hit with indiscriminate selling during the recent broad market decline. I’ll be searching for a better cobalt and nickel-tracking opportunity in the coming days. SOLD HAYN
I suggest booking partial profit in Lynas Corp. (LYSCF), a rare earth mining company based in Australia and boasting one of the highest-grade rare earth mines in the world (including neodymium and praseodymium (NdPr), lanthanum, cerium and other mixed heavy rare earths). Participants recently bought a conservative position in LYSCF using a level slightly under 5.25 (near the 50-day line) as the initial stop-loss on a closing basis. After rallying 15% from our initial entry point, it’s time to take some profit based on the rules of our technical trading discipline by selling half. I also suggest raising the stop-loss on the remaining position in this stock to slightly under 5.65 (near our initial entry point). SELL HALF LYSCF
We were also stopped out of our conservative trading position in Ryerson Holding (RYI), a value-added stainless steel, aluminum, carbon and alloys processor and distributor. Our stop-loss slightly under the 24 level was triggered this week during the broad selling event.
RYI’s recent underperformance wasn’t helped by steel futures falling to their lowest level since February 2020. The steel market was roiled by news that China’s metal production is set to resume after being hampered by government-imposed restrictions for most of this year. Demand in China for steel is also reportedly weak, due to problems in the country’s real estate sector. However, the new U.S. infrastructure bill includes provisions for some massively steel-consuming projects that could keep domestic demand elevated in the coming year. I’ll have more to say about steel—including some potential new trading positions—in the next update. SOLD RYI