Cliffs Natural Resources Inc (CLF) Stock Digging Itself a Deep Hole

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Cliffs Natural Resources Inc (NYSE:CLF) shares are falling off a, well, cliff. The Cleveland-based iron ore company missed analyst estimates by a wide margin by reporting an 11 cent loss in earnings per share. An avalanche of selling is carrying CLF stock down 12% at one point in early morning trading, though it has trimmed that to 9% by 1 p.m.

CLF Stock: Cliffs Natural Resources Inc (CLF) Stock Digging Itself a Deep Hole

Source: Shutterstock

With today’s drubbing, CLF stock has now given back pretty much the entirety of its post-election gains — and that’s saying something.

Amid higher inflation expectations, not to mention a groundswell in investor optimism, the metals and mining space soared from last November to mid-February. The buying binge was enough to double CLF’s stock price from $6 to $12.

And then, everything turned.

Since peaking at $12.37 a mere two months ago, Cliffs shares have been cut in half. Numerous support levels have melted in the face of its fiery descent. And now the stock rests below all major moving averages. The next two price zones of interest are $6.35 and $5.30.

The stock is retesting the former of those levels as I type. $6.35 represents a significant previous resistance area as well as a gap-fill of the post-election jump in November.

Source: OptionsAnalytix

If that gives way, consider $5.30 the stock’s next stop. It played support and resistance numerous times last year, making it a logical price target if CLF continues biting the dust.

To Trade CLF Stock or Not to Trade

At its current perch, Cliffs Natural Resources is far from a lay-up trade for bulls or bears. The principle issue facing sellers is the stock’s extremely oversold status. With shares already down 12% today, this is far from a low-risk entry for initiating new bearish trades.

And the challenge for buyers here is obvious — the stock looks like death. It hasn’t shown any technical signs of bottoming yet, making any rebound highly suspect. I’d seriously consider punting here. That is, wait for a better setup to trade Cliffs one way or the other.

Best-case scenario, CLF stock rallies a bit in the coming days, providing a better vantage point to short shares. Consider using the prior pivot high of $7.39 as a stop loss level.

At the time of this writing, Tyler Craig held no positions on any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2017/04/cliffs-natural-resources-clf-stock-craters/.

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