It's still too soon to put it in your portfolio, but Armco Metals Holdings Inc. (NYSE:AMCO) most definitely deserves a place on your watchlist. This Chinese metal stock is poised for a breakout move. It just needs the right nudge, and a little help on a certain front to let AMCO take flight.
Yes, Armco Metals Holdings relies heavily on demand from Chinese metal users, and with economic worries starting to surface in and around the country, demand for steel could wane. As has been the case far more often than not in recent years, however, those worries have more bark than bite. Translation: AMCO should be fine.
In support of that idea is the fact that steel prices have remained strong - and even gotten stronger - over the past twelve months, even if steel stocks haven't. Specifically, steel prices have advanced from $100 per tonne in July of last year to about $380 per tonne this month. While rolled steel (hot and cold) have tapered off a little more than raw steel have of late, they're also tapering off from multi-month highs hit in February. Iron ore prices have been pretty centered at $125 per tonne since this time last year. Iron ore is stable at $150 per tonne. Point being, if China's consumption were drying up and/or Armco Metals Holdings was being thrown into a situation that wasn't favorable, it would have shown up on steel price charts already. It hasn't happened, though.
So what needs to happen to make AMCO a buy? It needs to clear a major resistance line at $0.57. That level has kept the lid on the last three breakout efforts from Armco Metals Holdings Inc. (since October of last year), and the $0.57 level was pretty much where the stock topped in early 2013 too. At the same time, the stock's horizontal ceiling has been matched by a horizontal support line around $0.25, since late 2012. The net result is a chart that's been doing nothing but moving sideways for the better part of two years. Take a look.
Though the stock hasn't budged in a long while, that's not to say things haven't been brewing - there's two years' worth of pent-up bullishness that needs to be let out. Once it's unleashed, it's all apt to be unleashed in a hurry, much like the pent-up energy of a slingshot is rapidly unleashed when the pocket is released, propelling a rock or a small ball a major distance in a short period of time.
As far what suggests Armco Metals Holdings Inc. shares will be hurdled upward rather than downward when-and-if the trading range finally lets go is the massive volume we've seen materialize behind the bullishness from AMCO we've seen in two of the past three weeks. There are a lot of buyers here, which was one of the missing ingredients with prior breakout attempts.
Bottom line? Keep Armco Metals Holdings handy, looking out for a move above $0.57. That could be what opens the floodgates.
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