US Steel (X): Reaction To Earnings

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Trading Buddy: Good Morning, Melf!

Melf Elf: Wow...did you ever call tha-at right! US Steel failed the neckline retest and has made a new low after the release of earnings.

Trading Buddy: Where in the world did you get the idea that I "called" anything?

Melf Elf: Well, you predicted...

Trading Buddy: Melf, stop. Listen to me. I don't "call" anything. I don't "predict" anything. I describe for you any patterns that I detect, and I describe for you what that pattern breakout or breakdown suggests.

Melf Elf: Then you predict what will happen next, like US Steel is going to 40.39 on this H&S Top breakdown?

Trading Buddy: That's not a prediction, Melf. It's a measured move that is IN PLAY, based on what the patterns breakdown suggests. I'm not predicting that it will get MADE. We are trying to FOLLOW the market, as best we can. We're not trying to "predict" it. Do you understand?

Melf Elf: Yeah, I guess so.

Trading Buddy: Do you feel that your understanding on this topic of "predicting" is now complete?

Melf Elf: Oh-h, definitely! I understand that you are a COMPLETE JERK FACE.

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Tongue-in-check aside, we can see that Melf Elf very much wants "Trading Buddy" to TELL HIM the answers. He wants "predictions" about the future that always are reliable, and that he can "take to the bank."

In my view, all of the "predicting" that goes on is perfectly fine, but what we really need to focus on is what we actually are seeing, as of that last candlestick on the chart." Not what we want to see, based on some prediction, but what we actually are seeing. And, we need to focus on, if we're going to make a play, what is our trading plan? An example of that follows, below.

From my April 23 post, pre-earnings:

"Personally, based on how badly positioned US Steel is heading into earnings, I'd have to TAKE THE MONEY and sell it. That isn't advice, or a recommendation. I don't advise or make recommendations."

Like Trading Buddy, Melf Elf certainly didn't predict anything about how US Steel would react to earnings. US Steel "could have" reacted differently, and moved higher. In fact, immediately after the release of earnings, the stock was indicated to gap higher, above 52.00, in pre-market trading given the fact that Q2 earnings looked hopeful.* If the stock had rallied back to the neckline after the release of earnings, I would have shorted it based on the likelihood that it would NOT be able to get back above the neckline, and if it did, it would NOT be able to take out the recent failed retest high of 53.82. My reason for that was that The Bulls were not favored in any bid they made to go up against a broken 4-month H&S Top.

If it did take out the 53.82 high, I would have stopped out the trade (taken the loss), and would have moved on to the next trade. We always are going to have trades that don't work out. Limit the losses, and move on.

* "Bear moves/Bear markets descend on a cushion of hope."