Steel Stock Facing Off With Key Trendline

Keep an eye on X's 40-day moving average

Sep 9, 2021 at 3:39 PM
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The shares of United States Steel Corporation (NYSE:X) are in in the midst of a falling wedge, and have found support near the 40-day moving average, which was also the recent low's anchored volume weighted average price (AVWAP) level. That same level happens to be at the stock's +50% year-to-date area. United States Steel stock is also entering a period that's yielded fantastic results in the past, with the equity averaging a 6.8% and 10.8% pop in October and November, respectively, over the last 10 years. With these technical layers of support in place, now is the ideal time to speculate on X with calls.

The brokerage bunch remains pessimistic on the stock, despite the fact that its outperformed the broader market since its pandemic lows, so a shift in sentiment amongst analysts would put more wind at the security's back. Of the six in coverage, four still sport a tepid "hold" or worse rating. Meanwhile, despite a ton of covering, short interest still accounts for 13.7% of the stock's available float.

A change in tune in the options pits would also lift United States Steel stock, as the penchant for puts has been overwhelming of late. In fact, X's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 91% of readings in its annual range.

The good news for options buyers is United States Steel stock premiums are attractively priced right now. This is according to the equity's Schaeffer's Volatility Index (SVI), which stands in the 11th percentile of readings from the past 12 months. What's more, its Schaeffer's Volatility Scorecard (SVS) stands at an 80 out of 100, indicating X has exceeded options traders' volatility expectations over the past year.

Lastly, our recommended December call has a leverage ratio of 4.2, and will double in a 24.9% rise in the underlying stock

Subscribers to Schaeffer's Weekend Trader options recommendation service received this X commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.


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