2 Mining Stocks Flashing Bull Signals Before Earnings

A rough month for the metals sector could create buying opportunities for CLF and STLD

Oct 11, 2018 at 11:36 AM
facebook X logo linkedin

It's been a rough stretch for mining stocks, as evidenced by 4.6% month-to-date deficit for the SPDR S&P Metals & Mining ETF (XME). This pullback may have potentially created buying opportunities throughout the sector, though, with Cleveland-Cliffs Inc (NYSE:CLF) and Steel Dynamics, Inc. (NASDAQ:STLD) in particular trading near trendlines that have marked attractive entry points in the past.

Short Sellers Blast Outperforming Cleveland-Cliffs Stock

After topping out at a four-year high of $13.10 on Sept. 26, Cleveland-Cliffs pulled back to within one standard deviation of its rising 40-day moving average. There have been seven other times since 2015 CLF has come this close to its 40-day trendline after trading above it 60% of the time in the last two months and in eight of the past 10 sessions. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, the stock went on to average a one-month gain of 5.77% after these previous occurrences.

clf stock daily chart on oct 11

Today, CLF stock is up 1.7% at $11.80, finding support earlier in the $11.40-$11.50 region, home to its late-July highs. The shares are boasting a 73.9% year-over-year advance, and a round of short covering could fuel a bigger bounce.

Short interest on CLF surged 13.7% in the two most recent reporting periods to 43.96 million shares, representing 14.9% of the equity's available float, or almost four times the average daily pace of trading.

STLD Stock Trades Above Key Technical Support

Steel Dynamics has shed 4.6% so far in October, but the stock is now trading within one standard deviation of its 320-day moving average. In the two other times this has happened after the shares had spent a lengthy stretch above this trendline, they were up 9.12%, on average, one month later, with both of those returns positive.

stld stock daily chart oct 11

In today's trading, STLD has explored both sides of breakeven, last seen down 0.4% at $43.21. The equity earlier staged another successful test of its year-to-date breakeven level of $43.11, which has served as staunch support for the shares in 2018.

Should history repeat itself, a capitulation from some of the weaker bearish hands could strengthen tailwinds for STLD. It would take short sellers almost one week to cover the 7.42 million Steel Dynamic shares that are sold short, at the equity's average daily pace of trading.

Cleveland-Cliffs, Steel Dynamics Earnings Ahead

Looking ahead, both companies are slated to report third-quarter earnings next week, with Cleveland-Cliffs' results due out before the market opens next Friday, Oct. 19, and Steel Dynamics scheduled to unveil its numbers after the close next Wednesday, Oct. 17. CLF has closed higher in the session following the company's last two quarterly reports, averaging a 10.05% gain, while STLD's post-earnings price action has been more mixed -- adding 2.8% in July, and falling 0.3% last April.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI