ArcelorMittal stock (NYSE: MT) has increased 33% in the last six months and is currently trading close to $31 per share. The sharp rally over recent months is due to a recovery in global steel prices. The lifting of lockdowns over recent months and the successful vaccine rollout has led to expectations of healthy growth in shipments in 2021 and 2022 as demand gets back on track and supply constraints are reduced. Also, the U.S. raw steel capacity utilization for the week ending 19th June 2021 was 83%, which is significantly higher than the 57% recorded in the prior year period. This is also a marked improvement over the 51% utilization in the beginning of May 2020, which indicates that there are signs of a strong rebound in activity in the steel sector. But will ArcelorMittal’s stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely?
According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for MT stock average close to 5% in the next one-month (21 trading days) period after experiencing a 33% rise over the previous six-month (126 trading days) period. But how would these numbers change if you are interested in holding MT stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test MT stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
MACHINE LEARNING ENGINE – try it yourself:
IF MT stock moved by -5% over five trading days, THEN over the next 21 trading days, MT stock moves an average of only 0.5 percent. Also, there is a 50% chance that the stock will give positive return in the next one month following a 5% drop over the previous week.
Some Fun Scenarios, FAQs & Making Sense of MT Stock Movements:
Question 1: Is the average return for ArcelorMittal stock higher after a drop?
Consider two situations,
Case 1: ArcelorMittal stock drops by -5% or more in a week
Case 2: ArcelorMittal stock rises by 5% or more in a week
Is the average return for ArcelorMittal stock higher over the subsequent month after Case 1 or Case 2?
MT stock fares better after Case 2, with an average return of 0.5% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.5% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how ArcelorMittal stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold ArcelorMittal stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For MT stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although MT stock appears to be an exception to this general observation.
MT’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for ArcelorMittal stock by changing the inputs in the charts above.
While MT stock may have moved a lot, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Compass Minerals vs Southwest Gas shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.