My low-risk high-reward trade setup stock scans this morning popped up one of the world’s biggest steel producers as a short sale. I would like to buy into this steel producer but not at this price. I’m looking for the price of this steel producer taking another possible discount of 25% to 40% from its current price before the selling pressure stops. See below for more analysis on this short sale stock pick.
Short Sell POSCO. Ticker PKX
Sell Entry: 65.65 to 74.04
Stop-Loss: 75.80
Take Profit Areas
55.50
45.35
35.20
POSCO News and Analysis
Posco is saying they are going to invest $4.4 billion in 2009 to expand capacity and rebuild their steel furnaces. They are betting against the rest of the steel makers currently who are lowering their production capacity. Posco is trying to get more market share when the steel market turns around in the future. Posco is one of the only steel producers currently to maintain is production volumes despite the global slowdown. Some other Asia steel producers are doing the same as Posco. In the long term, they should succeed with this plan I believe. In the short term, I think it will be a negative for the share price, but actually making it a great buying opportunity of these shares a little later on. In the meantime I’m sticking to my short-sell position here on Posco.
I stick to my views that Asia is still the place to be invested short, intermediate and especially long term, and that Asia really does have the ability to suck up any excess supply with their 2009 forecasted 4% to 5% GDP growth and the associated demand that comes from that kind of growth. Although, be careful, Asia could head into a depression with the Western world, which that recipe is already in place right now if the USA and European governments and central banks don’t fix the credit crisis, liquidity problem, and resulting financial panic right now. I’m at least expecting a prolonged recession for the west. As far as a depression for the west and or the rest of the world, I hope not, but I’m not counting it out just yet. What is done now by the powers that be to fix this mess will depend on whether it’s a recession only or a depression.
