• Hot Stove Analysis

What an awful year for heavy material companies…

You’d think that a robust economy would cause a “rising tide” effect that fuels heavy material companies – but that most certainly has NOT been the case. The entire heavy material group is worth $100 billion in the U.S. – and many of these companies enjoy monopoly-like power. However, the stock performance in this sector has been outright putrid. Nowhere has this been more apparent than in U.S. Concrete (Nasdaq: USCR), which is down 53% year to date. Talk about a dropping a cinder block on your big toe – ouch!

However, is all the bad news already baked in? Perhaps. You see, on September 14, Barron’s published an article titled “Expect Cement and Rock Stocks to Bounce,” arguing that bad weather and political gridlock have weighed down heavy material stocks such as cement, concrete and asphalt producers.

If that’s the case, you can argue that U.S. Concrete is now oversold and looking to bounce. And as you can see below, all the metrics support the oversold argument. The relative strength index (RSI) is in the red, the moving average convergence/divergence (MACD) is trending at new lows and the slow stochastic oscillator (STO) is well below 20. All of these indicate a stock that’s being overly punished.

However, looking at the daily chart alone isn’t enough.

Let’s also examine the weekly chart and see if a similar oversold pattern is taking shape…

Once again, the oversold argument holds up. You see, U.S. Concrete has established the $45 level as support on two prior occasions dating back to 2016. At current levels of $34, the technical analysis indicates that you’re getting a stock that’s $10 below its previous support point, which is why it’s the featured stock in today’s Trade of the Day.