The company that operates as an independent iron ore mining company in the United States, Canada, and internationally in two segments, Mining and Pelletizing, and Metallics, Cleveland-Cliffs Inc. (NYSE: CLF) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Breakout from Flag Pattern: In the daily chart, the stock was in an uptrend after which it was in a consolidation phase with a narrowing range. This is a classic flag pattern, which is marked as purple color lines in the daily chart. Currently, the stock has broken out of the flag pattern and is continuing its uptrend. The breakout from a continuation pattern like the flag pattern indicates that the stock may move higher.
Daily Chart – CLF
#2 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color), indicating a bullish bias.
#3 Above MAs: The stock is currently trading above the 50-day and 200-day SMA. This indicates that the bulls have currently gained control of the stock.
#4 Bullish Stochastic: The stochastic shows that the %K (blue color) line is above the %D (orange color) line. This indicates possible bullishness.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line is also currently above the –DI line. This indicates possible bullishness.
#6 Channel Breakout: The stock’s weekly chart shows that it has recently broken out of a trend channel. This channel is marked on the chart in pink color. A breakout from a downtrend channel is a possible bullish sign.
Weekly Chart – CLF
#7 Bullish ADX and DI: In the weekly chart, the ADX line has moved up from below –DI and +DI lines. The +DI line and the ADX line are also currently above the –DI line. This indicates possible bullishness.
#8 Above MAs: In the weekly chart, the stock is currently trading above both 50-week as well as 200-week SMA. This implies that the uptrend is still quite strong.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for CLF is above yesterday’s close. This translates to a price of around $20.20.
TP: Our target prices are $24 and $28 in the next 3-6 months.
SL: To limit risk, place a stop loss at $17.60. Note that the stop loss is on a closing basis.
Our target potential upside is almost 19% to 39% in the next 3-6 months.
For a risk of $2.60, our target rewards are $3.80 and $7.80. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the flag pattern breakout level. 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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