Long Term US Steel Accumulator Doesn't Support
a Sustainable Upside Move
(to read sequentially, start at the bottom of the page and read up)
(If this is the first time you are reading this page, scroll to the bottom and read up)
The negative divergence into the highs in December and early January played out by price declining back down into the range from $26 to $22 (see 1/4 post below). Since then, price has recovered somewhat but we still aren't seeing any positive divergence into the lows and the market pressure accumulator isn't yet showing any reason to want to start buying the stock for a longer term upside move.
It has been awhile since I have updated the US Steel Accumulators. The main directional accumulator for X is the market pressure, shown immediately below. This accumulator first gave a sell signal on X back in April of 2011 and didn't give a buy signal again until July of 2012 (see posts near the bottom of the page). Since July, we see a rising accumulator especially during the various tests of the lows. A large increase in demand began in September of 2012 and this accelerated during October and especially November. We did see a bit of negative divergence (price rising as the accumulator falls indicating an increase in supply) but its wasn't strong enough to remotely consider coming out of the stock acquired in the high 'teens and low $20 range. (continued below)
The X liquidity accumulator, which measures trade volumes, shows very heavy buying during October and early November of 2012 as shown immediately above. Then it flattened over the balance of the year. So both accumulators continue to support higher prices in US Steel.
Given the improvement in the overall economy, one would expect to see institutions coming into basic industry issues such as US Steel. This is confirmed by both accumulators which show a sustained increase of demand and increased levels of buying.
We are now seeing an acceleration in buying into lows on US Steel. The more strongly up-sloping Accumulator tells us that buyside volume is increasing. $23 is still major resistance but the rising Accumulator tells us that it's just a matter of time before X takes out $23 and heads higher. Fundamentals move X more than technical's, so a move above $23 will probably be triggered by a positive move in one or more fundamentals. But from a technical perspective, the Accumulator is showing strong long interest in X.
Many so called accumulation/distribution public domain indicators simply call an up bar buy volume and a down bar sell volume. This is obviously absurd, more so now with HFT's and Algo programs manipulating spreads and front running your orders. The Accumulator examines each tick in several ways to determine buying from selling, hence it is much more accurate. More information, tutorials and additional Accumulator examples
The selling mentioned in the previous posting on 10/5 lasted all of 1 day and then turned around quite strongly. We see below the current US Steel Daily accumulator which continues to rise and indicates that X should take out the highs. Notice how the accumulator is rising more than the overall move in price. This is a very positive indication from the tape.
The Accumulator has now turned down at the lows again which indicate that the lows can be taken out. We saw buying into the move back to the lows but over the last three days that buying has turned to selling.
Since our last posting, US Steel has continued to trade a narrow range, the lows holding because the Accumulator continues to rise. Depending on your read of X's fundamentals, the Accumulator is telling us we should be buying into these lows.
US Steel has moved back down near the prior two lows in the 18.75-19.25 range. We can see that the Accumulator continues to rise indicating more buying into the lows. Depending on your read of X's fundamentals, the Accumulator is telling us we should be buying into these lows.
Since the prior update on the 13th, X has moved sideways and back down into the range and has covered out half of the move up from the lows. Notice how the Accumulator flattens but rises again as price moves lower. This is more positive divergence and it is a strong indication that X will move back up to the highs again. This is the pattern we want to see during a move lower in an overall longer term up trend. When price declines as the Accumulator rises, this is positive divergence and you should be buying into the move lower. This was the pattern that set the major lows on X in late July (go to the bottom of this page and read up).
Since the Accumulator showed positive divergence into the lows in late July, indicating a buy signal, X has risen from 18+ to 23+-. We've been updating these chart on this page. We show two images below: the upper image shows the 'Market Pressure' Accumulator which measures demand. It rose while price was declining in July and has since flattened out since X moved above +22.
The Liquidity Accumulator is shown below and it continues to show buying rather than selling into the move up. This is an indication that X remains in an accumulation up cycle. We will need to watch both Accumulators for signs of selling into highs and demand falling...which at this point in time it is not.
We've been following the Market Pressure Accumulator on US Steel (X) for the past month. As you can read in our first postings on 6/27/12 below, we've been waiting to see positive divergence into a low. We are seeing that now. The Market Pressure Accumulator is showing positive divergence into the lows at 18.50. For more detail, please read the posting below.
It's been a couple of weeks since our last update. Notice that the pink line, (the fast Accumulator) has been flat from July 3rd to today while price has declined back toward the lows. This indicates balanced trading and during a decline this is a 'quasi' positive in that it isn't a negative. Positive divergence would have had the Accumulator rise while price falls which would be a big positive for the stock. But the fact that it's flat is the first time we've seen this since it started declining over a year ago. There was a hint of this in mid May, but that pattern reversed in June.
So, is it time to buy yet? Answer: not quite yet but the action from 7/3 makes us more interested.
Since we published this piece in mid June, we've been watching with interest the pattern developing on the US Steel Accumulator. The short answer to the question is no, it's not time yet to buy US Steel. The image below shows that the Accumulator has not continued to rise and in fact has turned back down showing indicating selling. The positive divergence that was identified earlier in the month has not continued. The rise in the Accumulator described in the lower most image can now be seen as simply short covering from a decline. The move of the Accumulator back below the cyan colored line indicates that more selling has come into the stock over the past week.
We can use the Accumulator over longer term time frames to analyze the trading of individual securities. During extended up or down trends, the Accumulator can be very useful in identifying the nature of trading at major highs and lows. (Learn about the Accumulator and divergence patterns)
Take US Steel, X, for example. X has been in an extended downtrend since January 2011. The Accumulator is the pink line, the cyan the smoothed Accumulator. No price data is used, the Accumulator reads the tape so this isn't a moving average of price.
(close-up of the last 11 months)
Taking a closer look at X over the past 11 months, we can see there was positive divergence shown at Arrows A. When the Accumulator rises as price falls, this means that there is buying coming into the market. Liquidity is being added not subtracted into a low. This is called positive divergence and it is a leading indicator saying that the lows will hold and price can reverse and move back up. Typically, you see high volume at the lows when positive divergence is present.
So the lows in early October 2011 held but notice that at point B, the Accumulator had turned back down. Again in early February, the Accumulator turned back down prior to the February 2012 highs. The Accumulator declining while price rises is negative divergence. Except for brief periods of time, the overall slope of the Accumulator is negative, confirming that the down trend is still in place.
Over the past month, we have again seen positive divergence into a new set of lows shown as Arrows C. This indicates that the current lows that were made last week will hold. However, what we have not yet seen is an expansion up in the Accumulator which needs to be present for a longer term uptrend to be put into place. The jury's still out on that one. If X is going to establish a new up trend, we'll have a second chance over the next week or two. For now, buying into weakness is the indicated strategy, especially if supported by the fundamentals.
The Accumulator is designed to be used in addition to your existing analytics. It is not designed as a stand alone indicator. For swing trading or building longer term positions in important companies, the Accumulator can provide a deeper level of understanding into how a stock is trading than simply watching price. If the stock you are working with is coming into a support level, for example, and the Accumulator is showing selling down into that level, you may want to look at the next support level. If the Accumulator is confirming your support, your trade should be taken.
The Accumulator is a Windows application which can also be run on a Mac using a windows emulator. Monthly subscriptions are $277 including the datafeed to power the program. You can run as many Accumulator windows on as many different symbols as your computer can handle (20+) and of course they run in real time. To request a subscription or for more information, email firstname.lastname@example.org.