Since re-emerging from restructuring and subsequently going public again in 2021, shares of Algoma Steel Group Inc. (ASTL.TO) have been volatile as shareholders battle for price discovery. Needless to say, many investors are still shy of the name as the dust settles on the restructuring while other investors are clearly taking a liking to Algoma Steel given the bipartisan political support for its retrofit to electric arc blast furnaces and a march toward ESG. Politics and high finance aside, let's look at some diagnostics on the stock starting with our main coach, relative strength. SIA Chartsā relative strength rankings help investors manage risk by identifying stocks and sectors that are underperforming or starting to underperform relative to their peers and/or their benchmarks, indicating that capital is moving elsewhere. ASTL.TO has seen volatility within the ranks of the SIA S&P TSX Capped Composite Index Report, making several attempts at leadership only to slip back down the ladder. In February 2023, the shares were close to entering the Favored Green Zone only to retreat, while its winter run in 2024 was more successful as it rallied well up into the Favored levels only to retreat once more. Six months later and here we are again with shares now back in a Favored position at #54, up 80 spots in the past week and a whopping 114 rungs in the past month. Turning to the weekly candlestick chart, we can begin to establish the trading ranges with initial resistance at current trading levels with long-term resistance now at the $14 level. Support for ASTL.TO is now at the $9.25 level with further support at $8.50, which marks the bottom of the pricing channel. We have also included the average directional index (ADX), which is a short-term technical indicator used by traders to determine the strength of a price trend. Using this overlay from the SIA toolchest we can see positive divergence in the highlighted box is coincident as the shares surged at the end of 2023. Interesting to note that this same pattern appears to be forming once again (see arrow) even as the shares push up on resistance at $12, indicating the rally might have legs.
In the Point and Figure chart we have noted the declining tops with red circles as ASTL.TO formed lower lows in 2021 and 2022 but 2023 and 2024 appear to be the opposite pattern defined by higher lows and higher tops (green circles). We will watch with keen interest how this battle plays out and will watch initial resistance of $13.55 followed by $14.38 and finally the top of the channel at $15.57 to confirm major long-term breakout. There is a small zone of support initially at the $11.34 (3-box) followed by $10.07 (whole number) and $9.30 but $8.60 marks the bottom of the long-term trading range ($8.60-$15.57). Algoma Steel Group has a bullish SMAX score of 7, which indicates that it is exhibiting strength against other asset classes.
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