Got a Strong Gut? We’ve Got a Trade for You

Price action in the broad market has been so strong over the past month, even the “down and out” steel sector is making headway…
In late August, we noted how companies that produce steel to build skyscrapers, cars, bridges, and power lines are among the greatest “boom and bust” assets in the world. They soar and crash as the global economy fluctuates. The thin profit margins these companies sport add to their extreme volatility.
Today’s chart displays the steel sector’s volatility and sensitivity to investor sentiment toward global economic growth. It shows the past two years of trading in the world’s largest steel producer, ArcelorMittal (MT).
Like most all assets, MT was hammered in late 2011. Shares fell from their summer level of $35 to $15 (a 57% haircut). But the broad market action has become more bullish… and MT has bounced off its lows. It’s now close to staging a multi-month upside breakout. Should the world simply “not end,” volatile ArcelorMittal and the beaten-up steel sector could stage a big “bad to less bad” rally… and gain 50% in the coming months.