Metal stocks are finally starting to cool down from their red-hot streaks. And that’s a good thing. The inflation-fueled rampage into steel and mining stocks following the election was in desperate need of a pause. Even the strongest surges need the occasional respite to allow weak hands to exit with profits.
How you treat this week’s pullback opportunity in metal stocks depends on your perspective: You either the believe the mass influx into inflation-related securities like metals is the real deal or not; that this is the beginning of a new uptrend that can go the distance or not; or, finally, that this is the path of least resistance for the entire sector … or not.
If you’re like me and are willing to give the bulls the benefit of the doubt here, then this dip is a rousing buy. Sure, it may last a few days longer, but profits lie in wait at the end.
Here are three metal stocks demanding your attention during the week ahead.
Metal Stocks to Buy: Freeport-McMoRan Inc (FCX)
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Freeport-McMoRan Inc (NYSE:FCX) tops the list with a multi-day pullback beckoning to bulls. The retracement was well-deserved considering FCX stock’s recent rocket-ship rise.
Since bottoming at $9.24 in mid-October, FCX rallied as high as $16.42, before the recent retreat. That’s a 78% rip in a little over a month. Shareholders can’t fault the metal stock for taking a breather here.
The ongoing price drop has carried FCX shares close to a significant prior resistance level, which is now apt to become support. Keep a close eye on this $13.30 level to see if bulls step up to defend their turf.
Freeport-McMoRan’s cheap price tag makes it an alluring candidate for naked puts. Sell the Jan $12.50 put for 25 cents or better.
Metal Stocks to Buy: Nucor Corporation (NUE)
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Steel stocks have ridden high during the recent market rally. For a prime example look no further than Nucor Corporation (NYSE:NUE). The North Carolina-based company is in the midst of a seven-day pullback. Like its predecessor, Nucor’s stock drop is well-deserved.
Although the selling has carried Nucor shares below the 20-day moving average, the 50-day and 200-day are still rising. That means the bulls maintain control of the intermediate and long-term trends. And that makes dip buys all the more attractive.
If you’re willing to bet NUE stock rebounds sooner than later, consider selling the Jan $55/$52 bull put spread for 35 cents or better.
Metal Stocks to Buy: Vale SA (VALE)
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The rise in Vale SA (ADR) (NYSE:VALE) hasn’t been as jaw-dropping as NUE or FCX, but it’s still respectable. The Brazilian-based behemoth is the largest holding in most steel sector exchange-traded funds making it a logical target for traders looking for exposure to metal stocks.
Last week’s pullback has ushered VALE stock to an attractive buy point. The $8 area boasts a trifecta of support zones. There’s an unfilled gap, previous resistance and support pivots here.
Watch for buyers to materialize in the days ahead, then consider selling the Jan $7.50 puts for around 25 cents.
As of this writing, Tyler Craig was long FCX stock.
