Call Buying Explodes On These 2 Steel Stocks – Schaeffers Research (blog)

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Steel stocks are in focus today, after Longbow Research weighed in bullishly on the sector. Specifically, the brokerage firm believes “market conditions have finally stabilized.” Two names Longbow upgraded to “buy” are Steel Dynamics, Inc. (NASDAQ:STLD) and Nucor Corporation (NYSE:NUE). Now, not only are the steel stocks testing key chart levels, but options volume is soaring on both STLD and NUE. 

Options Traders Target July 35 Call on STLD Stock

Steel Dynamics stock was up 3.9% at its session peak, more recently seen down 0.2% at $33.10, and trading just above a familiar level of support. In fact, the $33 level — which has contained pullbacks throughout 2017 — is home to the stock’s rising 200-day moving average, as well as a 38.2% Fibonacci retracement of its September to December rally. Technical traders may expect this region to hold as technical support for STLD shares. 

steel dynamics today

Today’s options activity suggests traders are expecting a continued rise in Steel Dynamics shares. For example, almost 22,500 July 38 calls have traded. Compare that to the next most popular option — the July 35 call — where only 1,535 contracts have traded. Data suggests traders are buying to open the July 38 call, betting on STLD rallying above the strike before the options expire at the close on Friday, July 21. 

Call Buying Hits Annual Extreme on NUE Stock

Nucor stock is up 1.7% at $55.84, which puts it between two key technical levels. For example, the shares are trading just above the $55 level, which is home to a 38.2% Fibonacci retracement of their 2016 low and high. Right overhead, near the $57 level, is NUE’s 200-day moving average, a trendline that’s acted as support since late 2016. Traders should pay close attention to see if this moving average switches roles and acts as resistance going forward.

nue stock news

NUE stock is also experiencing extreme call volume today. In fact, its intraday call volume hit 52-week peak, with the 30,853 contracts traded comfortably outpacing the previous annual high of 18,191 contracts traded on Dec. 27. Like Steel Dynamics, most of the action has taken place at a single contract; namely, the July 62 call. More than 22,000 contracts have traded here, compared to just 1,066 at the next closest option. Data hints at buy-to-open activity, so it appears traders are betting on a bullish move in Nucor shares. 

This is part of an ongoing trend in the stock’s options pits. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and Nasdaq OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 2.62 for Nucor. Not only does this show call buying has nearly tripled put buying during the past two weeks, but this ratio ranks in the 97th annual percentile.  

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