February 2006, Volume 3 Issue 2                             Know It - Profit!

"Steel Producers Show Strength... Firm Gains Fortify Industry"

Greetings!

Steel Producers have put in a solid base since June 2005... recently, outperforming the S&P 500. Is this industry ready to prove its mettle?

Also... discover an exclusive method for timing stock trades. I'll show you the pieces to the puzzle.

But first, see which index is poised to make double-digit gains in the first quarter of 2006...

The Russell 2000 (^RUT) is up an impressive 7 percent relative to the other broad market indices.

The Nasdaq Composite (^IXIC) is trailing the Russell 2000 by 5 percentage points... up just 2 percent year-to-date.

The Dow Jones Industrials (^DJI) and the Standard & Poor's 500 (^GSPC) indices are lagging behind, with one-half and one percent relative gains, respectively.

Will the Dow Industrials lead the other indices lower? Find out in Market Metrics...

The PHLX SIG Steel Producers Index (^STQ) is red-hot... up 24 percent since last month!

Also, making stellar gains this month are the PHLX Semiconductor Capital Equipment Index (^SEZ) and the PHLX Oil Service Sector (^OSX)... both marking a 15 percent increase.

And... the AMEX Gold Bugs Index (^HUI) is up 15 percent for the month, as well.

For more leaders and laggards, go to Market Metrics...

AK Steel Holding Corp. (AKS) has broken out to a fresh 10-month high on rumors of a possible take-over by German steel giant ThyssenKrupp...

First, on 1/26/2006 a moving average channel buy signal was generated when the second consecutive candlestick closed completely outside the channel.

Next, I identified turning points based on Tom DeMark's Sequential. You'll notice it doesn't always pick the exact top or bottom. So, I use the signals as more of a yield sign... a point where I can begin looking for a candlestick reversal day.

The oscillator at the bottom of the chart is derived from a short and long-term Commodity Channel Index (CCI) crossover. It's based on a trading system developed by Ken Wood.

Don't let the name fool you. The CCI can be used on stocks, or any other tradable instrument. I'll reveal more about how I use the CCI in future newsletters. Stay tuned!

Finally, as a confirming tool, I applied the Point and Line (P&L) charting technique... identifying the recent top on 1/30/2006.

Created by Charles Drummond, P&L charting is a unique way of looking at market behavior. His geometric method has an uncanny way of nailing tops and bottoms. Sometimes, to the tick!

So, if we are going to take a position with AKS, we should wait for a pull-back to the area of support... in the $9.75 to $10.50 price range.

Where Are They, Now?...

In the November 2005 issue of Chart Wealth, I said Newmont Mining Corp. (NEM) would reach a price target between $52 to $55.

Where is NEM trading, today? Charts In Action has the answer...

I hope this month's Featured Chart further expands your thinking about technical analysis and its unlimited possibilities.

Although trend lines, Fibonacci extensions and Elliott Wave counts will serve you well, sometimes a new perspective will help you identify additional trading opportunities.

Until next time...

Good trading,

Russ Schmidt, President
Stock-Charts-Made-Easy.com