U.S. Steel stock (NYSE: X) has shot up an eye-popping 175% in the last six months (126 trading days) and now trades at over $19. After the stock saw a sharp fall in early 2020 with the outbreak of the coronavirus pandemic leading to a drop in steel prices, the stock has rallied from $7 to little over $19 in the last six months. This rise was driven by a sharp recovery in the global steel prices during this time, as the gradual lifting of lockdowns has led to expectations of faster economic recovery and higher steel demand. Economic stimulus packages announced in the U.S. and other economies is also expected to aid the demand for steel from construction and automobile sectors. Also, with the lifting of lockdowns, the company’s operations are getting back on track and shipments are likely to rise as supply constraints ease. That the steel industry is slowly getting back on track is clear from the rise in capacity utilization levels. The U.S. raw steel capacity utilization for the week ending 20th March 2021 was 77.3%, which is, in fact, higher than 75.3% recorded in the prior year period. This is also a sharp improvement over the 51% utilization in the beginning of May 2020, which indicates that there are strong signs of a rebound in activity in the steel sector.
But will U.S. Steel’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 X stock average close to -15% in the next one-month (21 trading days) period after experiencing a 175% rise over the previous six-month (126 trading days) period. Notably, though, the stock is likely to underperform the S&P500 over the six months, with an expected return which would be 16% lower compared than the S&P500.
But how would these numbers change if you are interested in holding X 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 X 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!
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- Will U.S. Steel Stock Regain Momentum?
- Will United States Steel’s Top Line Accelerate In 2022?
MACHINE LEARNING ENGINE – try it yourself:
IF X stock moved by -5% over five trading days, THEN over the next 21 trading days, X stock moves an average of 0 percent, i.e. it remains flat, which implies a return which is 1 percent lower than that of the S&P500.
More importantly, there is 47% probability of a positive return over the next 21 trading days and 44% probability of a positive excess return after a -5% change over five trading days.
Some Fun Scenarios, FAQs & Making Sense of X Stock Movements:
Question 1: Is the average return for United States Steel stock higher after a drop?
Consider two situations,
Case 1: United States Steel stock drops by -5% or more in a week
Case 2: United States Steel stock rises by 5% or more in a week
Is the average return for United States Steel stock higher over the subsequent month after Case 1 or Case 2?
X stock fares better after Case 2, with an average return of 0.2% 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 3.2% 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 United States Steel stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold United States Steel 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 X stock, the returns over the next N days after a -5% change over the last five 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 generally 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 X stock appears to be an exception to this general observation.
X’s returns over the next N days after a 5% change over the last five 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 United States Steel stock by changing the inputs in the charts above.
While U.S. Steel 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.