STLD

[Ramsburg]

Steel Dynamics Inc. (STLD)

Profile: Steel Dynamics, Inc., together with its subsidiaries, engages in the manufacture and sale of steel products in the United States. It operates in three segments: Steel Operations, Fabrication Operations, and Steel Scrap and Scrap Substitute Operations. The Steel Operations segment offers hot rolled, cold rolled, and coated steel products, including light gauge hot-rolled, galvanized, and painted products; structural steel beams and pilings; special bar quality and merchant bar quality rounds, and round-cornered squares; and billets and merchant steel products, such as angles, plain rounds, flats, and channels. This segment serves cold finishers, forgers, intermediate processors, original equipment manufacturers, steel service centers, and fabricators. The Fabrication Operations segment engages in fabricating trusses, girders, steel joists, and steel decking used within the nonresidential construction industry. The Steel Scrap and Scrap Substitute Operations segment offers heavy melting steel, busheling, bundled scrap, shredded scrap, and other scrap metal products, such as steel turnings and cast iron used in foundry and steel mill applications. The company was founded in 1993 and is headquartered in Fort Wayne, Indiana.
Sector: Basic Materials / Steel & Iron
Market Cap: 7.3$B
Website: http://www.steeldynamics.com

Technical Analysis:

STLD is bullish on all time frames, currently developing an ascending triangle for the past couple of months, and testing the resistance at $39 right now.

Main references:
- $39.00 -> current resistance and top of the ascending triangle
- $35.60 -> 50EMA
- $35.00 -> first ascending support and bottom of ascending triangle
- $30.00 -> 200EMA

A breakout of this triangle pattern would put a target of $46 In Play, while all trend analysis is compliant on this direction.

Fundamental Analysis:

STLD has a strong balance and a great fundamental history. Even at these prices near its all time highs, the company remains undervalue, trading at just 10 times forward 2008 earnings while the sector trades at 12 times earnings (this is the current market consensus).

Looking a bit further, and according to a recent note of research by KeyBanc Analysts, the future looks even brighter, with STLD trading at 9.3 times 2009FY earnings, an excellent multiple within the sector. Keybanc posted a $50 price target and they predict that STLD will beat next quarter's market estimates.

This was the most recent note of research by KeyBanc:



This sector is gaining momentum, and I expect to see some upgrades for STLD soon, these could be another catalyst to move the stock higher.

Trading Idea:

STLD looks like a solid position from both Technical and Fundamental points of view, it just needs a trigger to develop another up swing into new all time highs.
We're watching this triangle pattern development, to make an entry in case of breakout or if it fails to breakout now, we'll probably go to buy near the support level later on.

So we're setting the following standby trading plan:

Standby Trading Plan:
BUY STLD if it is set to close above $39.00

[Ramsburg]

Bought STLD @ $39.25 for the Portfolio

[basanlas]

Ramsburg,

Why the late post on this (10:49) and then a purchase? Many of us are working and if we do not catch the early posts we do not have a chance to view throughout the day and therefore miss out.Although lately that may be a blessing

[Ramsburg]

Ramsburg,

Why the late post on this (10:49) and then a purchase? Many of us are working and if we do not catch the early posts we do not have a chance to view throughout the day and therefore miss out.Although lately that may be a blessing

Hi Bansalas,

Due to time constraints we’re unable to post this earlier (I was still preparing the trading idea thesis and gathering information at the time we sent the daily newsletter). I was expecting to post this trading idea only today with the «buy if set to close above» trigger, but decided to post on Friday (since the entry would be made near the close anyway).
I’m sorry for that… this only is going to happen as an exception.
Our second newsletter with this trading idea was sent at 10:49AM, and we only bought STLD near the close as planned (15:50PM) 10 minutes before the closing bell.

Regards,

[Ramsburg]

Update:

STLD raised the 2Q08 guidance range to $0.90-$0.95, above market consensus estimate of $0.88. Following this guidance a few research departments raised their estimates and price targets: Goldman Sachs, UBS, Morgan Stanley, Citi and Dahlman Rose.
Current 2008 EPS consensus is now $3.40 and $3.50 for 2009, while some analysts like Goldman are already estimating $3.90 and near $4.00 EPS for 2009. I believe we can still have room for further upgrades if 2Q08 results manage to achieve the company's guidance.

From a technical point of view, Friday's session was a breakout (with volume) of the current ascending triangle pattern, this gives us the desired layout for this play. The technical target for this breakout would be something like $46, although I think there's further upside potential in play.

I'm just setting a stop level for now:

Trading Plan:
HOLD STLD with a stop @ $34.00

[Ramsburg]

Update:

No further developments yet, STLD had a quite session, trading all day above the breakout level.

Trading Plan:
HOLD STLD with a stop @ $34.00

[BigSully1]

IBD Daily stock analysis for STLD

http://www.investors.com/MediaCenter/?MediaID=1279&t=V

[Ramsburg]

IBD Daily stock analysis for STLD

http://www.investors.com/MediaCenter/?MediaID=1279&t=V

Thanks BigSully, (applaud)

Nice video from IBD

[Ramsburg]

Update:

No developments yet, STLD is still consolidating the recent breakout, trading above $39 despite the current negative broad market actions.

Trading Plan:
HOLD STLD with a stop @ $34.00

[Ramsburg]

Update:

STLD was unable to hold the $39 level mostly due to the general market behavior, as there was no negative catalysts in play.
Anyway, this sell-off didn't affect the overall bullish pattern for STLD, it has a support a little below $37 (50-EMA), and at $35.50, this sell-off can be viewed as just a part of a normal consolidation process and some reaction to the broad market tumble (external noise to this sector's Bullmarket).

We'll keep the same plan for now:

Trading Plan:
HOLD STLD with a stop @ $34.00

[Ramsburg]

Update:

STLD was among the biggest losers during yesterday's session. A big sell-off in steel related (not only) was caused due to market panic and worries about US recession, even Oil related stocks were down yesterday while Crude was hitting new all time highs.

Even if I enjoy this sector, and trust the fundamentals, I can't argue against the market, in this case STLD is breaking down the ascending layout, and its already trading below its 50-EMA. Our stop level is few ticks below yesterday's close, so we'll most likely be stopped out of this position during today's open.

Trading Plan:
HOLD STLD with a stop @ $34.00

[Ramsburg]

Stop activated @ $33.64 during the open.