Headquartered in Melbourne and with operations in Australia and New Zealand, BlueScope Steel is one of the blue chips of the Australian Securities Exchange. The company provides flat steel products for several industries, including the automotive, manufacturing, and building sectors, in Australia, New Zealand, Asia, and the Pacific, as well as owning 50% of North Star BlueScope Steel in North America.

The industries comprising the company’s main markets were hit hard by the global economic downturn, and BlueScope Steel followed them down from a reaction high of 5.19, hit 5 November 2008, to a low of 1.68, hit 18 May 2009, as revenues fell. Earnings underperformed when reported on 22 February 2009, accelerating the downtrend and setting a strong resistance level at 3.50 that has been tested repeatedly since that date but not successfully broken, as shown on the chart below:

The price of BSL recovered through March and the downtrend line was broken in early April, turning from resistance to support as the price returned to the 1.90 level and set a new low for 2009. However, on 5 May BlueScope Steel announced a shares sale to reduce debt and strengthen its balance sheet. The announcement helped break the downtrend, which reversed in mid May and climbed back to its resistance line at 3.50—almost doubling off its low.

On 17 August, BlueScope Steel posted a fiscal year net loss and forecast a another for the first half of 2010 as well. The news did not sit well with investors, who sold off the stock from 3.50 to 3.00, where it has consolidated since that time.

On 30 September the company announced it would ramp up production at its Port Kembla NSW steelworks facility from 75% of capacity to 100%, based upon rising demand during the September quarter. Nevertheless the resistance level continued to hold.

From the date of the shares sale announcement, volumes surged, reaching a high on 29 May of 76.02 million. However, since early August, average volumes have been declining. The resistance at 3.50 has held as the price has set a series of progressively higher highs, as shown below:

This divergence between demand, as illustrated by volumes, and price action, indicates some hesitancy in the market despite the enticement of the ramped-up production. The higher highs indicate a bullish attempt at an uptrend, but first the price action must force its way through that stubborn resistance level. Until that is achieved, the uptrend remains questionable.

technical analysis by Craig Liles

Popularity: 4% [?]