Schaeffer's 43rd Anniversary Stock Picks in 2024

Cleveland-Cliffs Stock Could Be Poised for Fresh Highs

Cleveland-Cliffs stock could benefit from an unwinding of pessimism

Deputy Editor
Sep 23, 2021 at 11:25 AM
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Clevland-Cliffs Inc (NYSE:CLF) is popping today, last seen up 4.8% to trade at $20.93, and if past is precedent, the mining stock could be getting ready to bounce even higher. While the equity has struggled on the charts over the last month, falling 16% in that timespan, the shares recently pulled back to the 160-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, previous tests of this trendline have predicted upside breakouts 100% of the time.

According to White's data, one similar signals has occurred in the past three years. The security enjoyed an incredible 44.9% return in the ensuing month. From its current perch, a similar move would put Cleveland-Cliffs stock near the $29.50 mark -- well above its Aug. 13 seven-year high of $26.50.

CLF Chart September 23

If CLF stock again takes a bounce off the aforementioned trendline, plenty of pessimists could be forced to unwind their positions. Most notably, 9.5% of the equity's float is sold short, hinting at short-squeeze potential. The equity could also benefit from analyst upgrades, considering three of the six brokerage firms in coverage maintain lukewarm "hold" assessments.

A further unwinding of pessimism amongst options traders could also bode well for Cleveland-Cliffs stock. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CLF's 50-day put/call volume ratio stands higher than 95% of readings from the past 12 months, meaning puts are being picked up at a faster-than-usual clip.

It just so happens to be an excellent time to purchase premium, as well. The stock's Schaeffer's Volatility Index (SVI) of 62% rests below 87% of all readings from the past year, hinting at muted volatility expectations.
 

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