AK Steel

AKS

Company. "AK Steel produces flat-rolled carbon, stainless and electrical steel products, as well as carbon and stainless tubular steel products, for automotive, appliance, construction and manufacturing markets." (company website)

Buy. AK Steel popped up in a screen on July 20 because of the "stick sandwich" candlestick formation, supposedly a bullish sign. I passed at that time because of the two dark candlesticks showing higher opens that could not be sustained. It will pull back, I said sagely to myself. And so it happened.

I decided to buy this week inasmuch as it appeared that AKS was turning around from the pull-back. According to MarketEdge, the longer-term prospects for AKS are good. In July the company reported a profit of 85¢ per share, the first profit in two years, compared to a loss of 72¢ per share a year ago. The company has new management and is trying to adjust its business mix to take advantage of higher prices in the spot market, compared to the many longer-term contracts it currently holds.

Right now, AKS is a tad oversold, and I'm counting on an up-day in the market to give it a boost and get it going again. That may be wishful thinking. Since I made the buy this morning, the price has fallen, and I'm now down more than 4% and the day isn't even over yet!

Sell. AKS made a big jump last week, and its prospects began to look rosier, notwithstanding its recent appearance on the list of "analysts' lowest rated stocks." My confidence withered today, however, when I saw it gap up to open and then drift lower, nearly wiping out Friday's gains. I decided to take profits.

In theory — in theory — AKS should be ready to break out, having had a big correction, peaked, pulled back slightly, and again equaled the previous peak (see sidebar). On the other hand, I remember last year's "September swoon" all too well.

In short, a bird in the hand.