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The shares of United States Steel (X) have been losing steam over the past month, after the stock’s latest rally culminated in an April 1, four-year high of $39.24. The stock has since slipped below its 20-day moving average, though it still maintains a 22% year-to-date lead. Now may be the perfect opportunity to buy the equity on the dip, though, as X has just pulled back to a historically bullish trendline that could help it stage a comeback in the weeks to come.

The trendline in question is United States Steel stock’s 80-day moving average. According to a study from Schaeffer’s Senior Quantitative Analyst Rocky White, the security has come within striking distance of this trendline three times over the past three years, seeing a positive one-month return after these signals 67% of the time, while averaging a 12.7% pop. From its current perch of $29.24, a similar move would place X just shy of the $33 mark.

With four of the six analysts in coverage calling X a tepid “hold” or worse, it looks like the security could benefit from a round of upgrades. Plus, short sellers are already hitting the exits, given short interest is down 14.3% in the last two reporting periods. Yet, the 27.60 million shares short account for 10.7% of the stock’s available float, indicating the security could still see tailwinds from a further unwinding of this pessimism.

United States Steel stock could also get a boost from a sentiment shift in the options pits. In fact, X’s Schaeffer’s put/call open interest ratio (SOIR) of 1.46 sits higher than 94% of readings from the past year. In other words, short-term options traders have rarely been more put-biased

Source: Forbes

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