Cleveland-Cliffs Inc. (NYSE: CLF) seems to be getting ready for a price bump in the short-term as per the latest charts. Cleveland-Cliffs Inc. operates as a flat-rolled steel producer in North America. The company offers carbon steel products, tubular components, and tinplate products.
Bullish Move – Chart Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past several months. This is marked in pink color. The stock had typically taken support at the bottom of the channel before bouncing back. The stock has currently broken out of the downtrend channel, indicating possible bullishness.
CLF – Daily Chart
#2 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#3 Price Above MAs: The stock is trading above its 50-day and 200-day SMA, indicating that bulls are firmly in control.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line is currently above the (-DI) line and the ADX line is starting to move higher from below the +DI and -DI lines.
#5 Flag Pattern Breakout: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart in purple color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern, indicating possible bullishness. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are presently in control.
CLF – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CLF is above $26.50.
TP: Our target prices are $35 and $39 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $22.00. Note that the stop loss is on a closing basis.
Our target potential upside is 32% to 47% in the next 3-6 months.
For a risk of $4.50, our first target reward is $8.50 and the second target reward is $12.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara
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