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IBD Stock Of The Day: ‘Green Steel;’ Play Hits Buy Zone

Nucor

Nucor

NUE


$6.82


6.04%


IBD Stock Of The Day: 'Green Steel;' Play Hits Buy Zone33%

IBD Stock Analysis

  • Clears 119.42 cup-with-handle buy point in strong volume
  • Relative strength line hits short-term high
  • Some other steelmakers show strength
IBD Stock Of The Day: 'Green Steel;' Play Hits Buy Zone

Composite Rating

IBD Stock Of The Day: 'Green Steel;' Play Hits Buy Zone

Industry Group Ranking

IBD Stock Of The Day: 'Green Steel;' Play Hits Buy Zone

Emerging Pattern

IBD Stock Of The Day: 'Green Steel;' Play Hits Buy Zone

Cup with Handle

* Not real-time data. All data shown was captured at
3:14PM EST on
11/22/2021.

Nucor (NUE) is Monday’s IBD Stock Of The Day as the steel producer touts an energy efficient new product, while gearing up for an industry cycle extended by the recently signed infrastructure law. NUE stock, among the big S&P 500 gainers in Monday’s stock market action, charged past a buy point from a cup-with-handle base.

Infrastructure Law Is Boon For NUE

NUE stock led the group of U.S. steelmakers higher, joined by Steel Dynamics (STLD), U.S. Steel (X) and Cleveland-Cliffs (CLF). The group also rallied on Nov. 8, following the House’s long-delayed passage of the $1.2-trillion infrastructure bill, which included $550 billion in new spending.

Nucor CEO Leon Topalian has said that approval could boost U.S. steel demand by as much as 5 million tons per year for every $100 billion of new investment. However, given the time to get projects up and running, any major boost would likely wait until 2023.

Nucor Gains Auto Sector Traction

Yet Nucor has some nearer-term drivers. On Oct. 5, the Charlotte, N.C., company unveiled its new Econiq line of purported net-zero carbon steel products and announced General Motors (GM) as the first customer.

Asked on the Oct. 21 Q3 earnings call whether Econiq offered a way to boost margins or gain automotive market share, Topalian said yes to both. He added that the effort would involve “very significant tonnages” and “ramp quickly.”

Nucor says its use of recycled scrap-based electric-arc-furnace technology enables it to operate at a greenhouse-gas-intensity that’s 70% below the industry norm. The new wrinkle, Econiq will apply credits from 100% renewable electricity and high-quality carbon offsets to negate any remaining emissions.

While reporting record Q3 earnings, Nucor said Q4 results could produce another record.

After quadrupling from summer 2020 lows to a peak of $1,945 per short ton in August 2021, hot rolled coil prices have hung pretty tough, easing to around $1,800.

While peak steel prices has often been an occasion for investors to sell, hopes for an extended cycle have steel stocks behaving constructively and earning another look.

Nucor’s $1.7-billion steel plate mill under construction in Brandenburg, Ky., is on track to start production in late 2022, serving military, infrastructure, heavy equipment and offshore wind energy sectors.

NUE Stock Analysis

NUE stock peaked at 128.81 on Aug. 13, around the top for steel prices, then pulled back below its 50-day average.

Nucor reclaimed its 50-day line on Oct. 25, then surged higher on Nov. 8, as Wall Street celebrated passage of the infrastructure bill.

NUE stock’s 119.32 high on Nov. 8 became the high point on a handle, according to a MarketSmith analysis, creating a buy point 10 cents higher. On Monday, NUE stock surged 6% to 119.67. The buy range runs through 125.29.

NUE stock has an excellent 95 IBD Composite Rating, a single rating combining technical and fundamental factors.

On Monday, the elite IBD Leaderboard portfolio expanded its position in NUE stock.

Other steel stocks also fared well. STLD stock climbed 6.2%, X stock 4.3% and CLF stock 3%. CLF stock is part of the flagship IBD 50 list.

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