Thursday, May 7, 2009

MTL, for a change

I'm having a burnout, exhaustion from all these financial "stress test" result leaks and the actual anticlimactic results themselves, so I decided to take a look at my most successful holding of past 2 months. It's a commodity stock, a Russian iron ore/coal/steel company Mechel Steel Group OAO (MTL).

Look at the weekly chart. This stock had a great run from October 06 to June 08. I had this stock from $45 to $55, sold it, and watched the spectacular crash from the sideline as far as this stock was concerned. It was not just commodity crash; there were allegations of price fixing, and after Mr. Putin wished the MTL president "well" after the president couldn't attend the government meeting for "health reasons", the stock really crashed.

I kept watching. Then in the miserable market I started to notice positive divergence popping up one after another. They are all noted on the weekly chart. And when the March market low didn't affect MTL and other Russian stocks I was watching (RSX, VIP), I decided to wade in. It was part of the hedge against inflation (commodity play), and a contrarian play. Among BRIC countries, investors and traders seemed to have turned away from Russia, ignored India while they still favored China and Brazil. I have no feel for India, so Russia would be my play.

It has turned out great, so far. Up over 80% from my first purchase, with average price of $4. This stock is very unpredictable if you look at it daily. A strong volume sell or buy appears seemingly out of nowhere, on no news. But if I look at the longer-term weekly chart, I do like what I see. 13-EMA may be on its way to crossing 34-EMA, a sign that the stock may be entering the bullish phase again. So I'm letting it run, nervously. From the daily chart, it could come back down to $5.50 to $6.

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