Material and mining stocks have awoken. And it is glorious.
Once the laughing stock of diversified portfolios, commodity-related firms are finally pulling their weight. One of the biggest winners in the space is Cliffs Natural Resources Inc (NYSE:CLF). CLF stock reported earnings this morning and is adding to its already gargantuan gains.
Second-quarter earnings per share came in at 7 cents, beating analyst estimates by a handy margin. Revenue also topped estimates coming in at $496 million versus expectations of $482 million.
Shares of CLF are up about 2% from yesterday’s close. On the technical front, the bulls are in complete control with buyers dominating over the past two months.
Prices are flying high and the moving averages are stacked atop each other in bullish fashion.
The 200-day moving average is rising for the first time in ages showing CLF has risen sufficiently to turn its long-term trend.
Year-to-date gains are upward of 400%. Such mouthwatering numbers are why speculators play in the cheap stock arena, as the higher risk carries the potential for higher rewards.
The CLF Trade
If you think the good times keep rolling for CLF stock look for a low risk entry in the days ahead. Shares are becoming fairly overbought so a pullback would do us some good here. Use the $6.50 level as a stop loss. A breach of that pivot would signal a reversal in the short-term trend.
If you can’t help but go the more leveraged route, consider a straight call option purchase. I suggest the Oct $8 call, currently trading for around a dollar. The risk will be limited to the initial $1 debit and forfeited if CLF stock sits below $8 at expiration.
The reward is unlimited offering unfettered gains if the stock continues reaching for the stars.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.