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In trading on Tuesday, shares of Gerdau S.A. (NYSE:GGB) entered into overbought territory, changing hands as high as $9.07 per share. We define overbought territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be overbought if the RSI reading rises above 70.
In the case of Gerdau S.A., the RSI reading has hit 71.5 — by comparison, the universe of metals and mining stocks covered by Metals Channel currently has an average RSI of 56.6, the RSI of Spot Gold is at 53.4, and the RSI of Spot Silver is presently 53.6.
Investor could look at GGB's 71.5 reading as a sign that the recent heavy buying is soon reaching a point of exhausting itself, which could mean shares are due for a pullback.
Looking at a chart of one year performance (below), GGB's low point in its 52 week range is $6.60 per share, with $15.11 as the 52 week high point — that compares with a last trade of $9.06. Gerdau S.A. shares are currently trading up about 5.7% on the day.
According to the ETF Finder at ETF Channel, GGB makes up 5.48% of the Steel ETF (AMEX:SLX) which is trading higher by about 3.5% on the day Tuesday.
GGB operates in the Non-Precious Metals & Non-Metallic Mining sector, among companies like Canyon Copper Corp (CNYC) which is trading flat today, and China Precision Steel Inc (NASDAQ:CPSL) trading up by about 5.1%. Below is a three month price history chart comparing the stock performance of GGB, versus CNYC and CPSL.
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