Acerinox SA (BME: ACX) is a major Spanish steel producing conglomerate headquartered in Madrid. The company continues to feel the negative effects of the virus outbreak and the lockdown, which followed after. Given the slowdown in manufacturing production across the globe, steel producers like Acerinox have to fight for demand, which involves drastic cost reduction measures that most often lead to job cuts. Because the Spanish steel manufacturer has to compete with such giants like ArcelorMittal, China Baowu Steel Group and Nippon Steel, it can be difficult to secure contracts. However, the recent loosening of the lockdown measures during summer helped the steel industry not to collapse. There could be a light at the end of the tunnel, especially with the news that pharmaceutical companies are close to a COVID-19 vaccine. Given that most of the businesses are just trying to stay afloat for the remaining of 2020, the main focus now falls on 2021 and further, where it is believed that demand might stabilise again. Despite the harsh competition, once global manufacturing production picks up again, there could be plenty of business for everyone, which may attract attention to ACX again.
After ACX hit its all-time low in March, the stock started shifting higher and today the price is once again knocking on the door of its strong resistance area between the 7.09 and 7.11 levels, marked by the highs of September 18th and 28th respectively. The upside is also currently supported by a short-term tentative upwards-moving support line taken from the low of September 21st. However, in order to aim for higher areas, we would still prefer to wait for a push above the aforementioned resistance area between the 7.09 and 7.11 levels, hence why we will take a somewhat bullish approach.
If, eventually ACX pops above the previously mentioned resistance area, that may attract a few more buyers, as such a break would confirm a forthcoming higher high. The stock might then travel to the 7.22 obstacle, or even to the 7.31 zone, marked by the inside swing low of August 14th. The share price could temporarily stall there for a bit, but if the buyers are still feeling comfortable, the next potential target might be at 7.44, which is the high of August 18th.
At the time of writing, the RSI is above 50 and points higher. The MACD is above zero and also points higher, while rising fractionally above its trigger line. The two indicators show increasing upside price momentum, which could come inline with the above-mentioned scenario.
Alternatively, a strong move lower and a break below the previously-discussed upside line, may spook new buyer from entering, especially if the price also falls below the 6.79 area, marked by the current lowest point of October. If so, ACX could end up dropping to the 6.72 obstacle, or even to the 6.64 level, marked by the lowest point of September.
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