BlueScope Steel (OTC:BLSFY) is an Australian steel products manufacturer founded in 2002 and headquartered in Melbourne. The recent commodities upcycle helped the stock climb above A$26 a share for a while. Currently at A$21.24, the company’s market cap is still north of A$10 billion. But for how long?
Bluescope ‘s recent surge didn’t come out of nowhere. It is part of a recovery from as low as A$1.47 which has been in progress since mid-2012. However, all investors must know that no trend lasts forever, especially in the commodities market and the related companies. Should we expect Bluescope ‘s uptrend to continue or is it time for a pullback?
The weekly chart above puts the stock’s nine-year ascent into Elliott Wave perspective. Its structure can easily be seen as a five-wave impulse, labeled 1-2-3-4-5, where the fifth wave is extended. Unfortunately for the bulls, a three-wave correction is supposed to occur after every impulse.
Extended or not, the fifth wave is usually erased completely by the corrective phase of the cycle. For Bluescope, this means a decline to the support area of wave 4 near A$10 – A$9 a share can be expected. Percentage-wise, this translates into a >50% plunge from the current level.