Cliffs Natural Resources Digs Into a Bullish Position (CLF)

Diversified mining company Cliffs Natural Resources (CLF) rallied nearly 4% out of a technically bullish formation after showing constructive movement in recent weeks. Right now, active investors and traders could take advantage of a further push higher in CLF stock, with defined risk and a natural price target.

beat the bell stock picking adviceThe iron ore and coal mining company with locations in North America, South America and Australia announced Aug. 7 that Lourenco Goncalves would start immediately as its CEO and chairman — news that didn’t move the stock much.

A little further back, on July 23, Cliffs reported mix results for its second-quarter, with sales coming in 26% lower year-over-year. CLF stock dipped a little the following day, but the day after, Cliffs rallied almost 7% and set off a three-day nonstop move that seemingly put some pep back in its step — at least in the near- to medium-term time frame.

The SPDR S&P Metals and Mining ETF (XME), which weights CLF at 3.75%, also rallied Monday and broke past lateral resistance and to fresh year-to-date highs. Seeing this bullish move in the metals and mining index also provides more substance and perspective for a potential further push higher in CLF.

mining stocks CME
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CLF Stock Charts

On the weekly chart, note that in June, CLF stock revisited its 2009 lows, but on waning momentum. The relative strength index bottomed in April 2013, and with the June lows in price, Cliffs made a higher low, thus flashing bullish positive divergence and pushing the stock past diagonal resistance dating back to 2012.

In the bigger picture, Cliffs stock has been in a relentless downtrend since the summer of 2011, but with the losing downside momentum coinciding with the 2009 lows, a better bounce opportunity might be upon us.

CLF stock chart weekly
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On the daily chart, note that the late July rally pushed CLF stock back above its 100-day simple moving average (blue line) for the first time since January. Cliffs then consolidated in a classically bullish flag formation in early August, and with Monday’s rally, the stock scored a marginal break out of said formation.

CLF stock chart daily
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From here, the next logical upside attraction point becomes the 200-day simple moving average (red line), which currently comes in around the nice and even $20 mark. From Monday’s close, the $20 area target is just about 10% away, thus offering good upside reward for active investors.

For risk management purposes, note that any break back below the 100-day moving average would nullify the near-term bullish setup in CLF stock.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

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