United States Steel Corporation (X) shares fell in August to the lowest low since March 2016, the last year of the Obama administration, after giving up the last tranche of gains booked in reaction to President Trump's attempts to revive the American steel industry through protective tariffs. Even worse, the stock now looks set to trade in the single digits for the first time since the worldwide commodity downtrend ended in early 2016.

The long-term chart is equally disastrous, showing zero total returns except for dividends in the past 16 years. It's also shocking that U.S. Steel has failed to benefit from the 10-year economic expansion, ignoring a tailwind that will vanish during the next recession. And ominously, continued downside will test the 2003 low for the second time in less than four years, raising the odds for a breakdown that drops the former industry giant toward penny stock status.

X Long-Term Chart (1993 – 2019)

Long-term chart showing the share price performance of United States Steel Corporation (X)

A two-year uptrend ended at $46 in 1993, giving way to a shallow but persistent downtrend that posted a long series of lower highs into the 2003 low at $9.61. Keep that price in mind because the current downturn has reached within one point of that level and could test it in the coming weeks. A powerful recovery wave then took hold, completing a round trip into the prior decade's high in the fourth quarter of 2004.

A December 2005 breakout signaled a historic advance that nearly quadrupled the stock's value into June 2008's all-time high at $196. Unfortunately, the bottom dropped out in the next nine months, relinquishing an astounding 91% into the March 2009 low in the mid-teens. The subsequent bounce posted impressive gains but failed to hold the .214 sell-off retracement level, completing a double top breakdown in 2011.

The decline found support at the 2009 low after two years of testing, yielding a healthy uptick that stalled at double top resistance in 2014. Price action in the past five years stretched to an all-time low in 2016, while the post-election rally reversed within a few ticks of the 2014 high in 2018. The stock is once again trading near 2003 and 2008 lows, translating into no upside in nearly two decades.

The monthly stochastics oscillator crossed into a buy cycle in January 2019, but the signal failed in April, yielding a long string of two- and three-year lows. The channeled downtrend in the past 18 months is more bearish than it looks, indicating few short squeezes and plenty of bottom fishers. Unfortunately, shareholders waiting for a turnaround have been disappointed over and over again, generating a continuous supply of selling pressure.

X Short-Term Chart (2016 – 2019)

Short-term chart showing the share price performance of United States Steel Corporation (X)

The on-balance volume (OBV) accumulation-distribution indicator posted an eight-year high at the 2018 price peak and rolled into a distribution phase that has now carved three lower highs. Even so, OBV is still above the July 2017 low posted when the stock was trading in the low $20s, indicating steady bottom fishing and value hunting. Unfortunately, the dark side of this bullish divergence has played out so far, with one group of bulls after another giving up and taking their losses.

The decline into 2016 undercut the 2003 low by more than three points, posting an all-time low at $6.15. A Fibonacci grid stretched from that level into the 2018 high is instructive, with the stock breaking the .786 retracement above $15 in May 2019 and rolling lower after a failed three-month test at new resistance. This harmonic level often marks the last line of defense prior to a 100% retracement, exposing the downtrend to an additional 40% loss in the coming months.

The Bottom Line

U.S. Steel stock is trading at a three-and-a-half-year low, and it could drop another 40% before committed buyers return in force.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.