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Cleveland Cliffs specializes in the mining, beneficiation, and pelletizing of iron ore, as well as steelmaking, including stamping and tooling. It is the largest flat-rolled steel producer in North America. It operates 4 major iron ore mines in Minnesota and Michigan and operates a hot-briquette iron facility in Toledo, Ohio.
The company has a market cap of $12.81 billion and trades on average 23.3 million shares per day.
What makes this stock study intriguing is that on Friday morning October 21, CLF jumped 13.7% shortly after the open. This type of movement in a stock in a day is what makes every trader take notice. It turns out that CLF set itself up for very strong growth in 2022. Revenue surged 265% to $6 billion. Earnings per share exploded from .02 last year to $$2.33 per share and Net Income exploded $1.3 billion from only $2 million in the year ago quarter.
Also, in the last six months $CLF improved its stock value for shareholder by purchasing back $1.2 billion or 10% of its outstanding shares. Cleveland-Cliffs, based upon its most recent financial reporting is on a strong upswing, driven by increased steel demand, and the huge potential for further infrastructure spending to send it stock price even higher. The U.S. governments planned infrastructure spending boom bodes well for $CLF stock prospects. The prices of iron ore have tanked in the last few months which also bodes well for $CLF.
The company went from $2 billion in annual revenues in 2019 to expected revenues of $21 billion this year. To say that the company crushed estimates is the understatement of understatements. Since steel is the lifeblood of economic growth the good earnings news from Cleveland Cliffs bodes promising for the automotive, infrastructure and manufacturing sectors. Over the previous year, steel stocks had been battered. This earnings news helped boost the steel sector on Wall Street and paints a picture of stronger than expected economic recovery. Wall Street Analysts also point to the reality that major federal infrastructure spending is on the horizon. $CLF being the nation’s largest flat rolled steel producer in the country should benefit further from legislation when it occurs which promises to upgrade and maintain roads, railways, airports, port facilities, electric vehicle infrastructure, and the U.S. water supply.
In this weekly stock study, we will look at and analyze the following indicators and metrics as are our guidelines which dictate our behavior in deciding whether to buy, sell, or stand aside on a particular stock.
- Wall Street Analysts’ Estimates
- 52-week high and low boundaries
- Vantagepoint A.I. Forecast (Predictive Blue Line)
- Neural Network Forecast
- Daily Range Forecast
- Intermarket Analysis
- Our trading suggestion
We don’t base our trading decisions on things like earnings or fundamental cash flow valuations. However, we do look at them to better understand the financial landscape that a company is operating under.
Analysts Ratings
The 7 analysts offering 12-month price forecasts for Cleveland-Cliffs Inc have a median target of 27.00 , with a high estimate of 38.00 and a low estimate of 21.10 . The median estimate represents a +4.77% increase from the last price of 25.77.
Power Traders love to see this type of divergent opinion on a stock that is widely traded. $CLF has had huge momentum. It’s become a favorite stock of swing traders particularly after earnings announcements.
52-week High-Low Chart
Over the last 52 weeks $CLF has traded as high as $26.51 and as low as $7.59 . This means provides us with an annual trading range of $18.92 When we divide this metric by 52 weeks, we can determine that the average weekly trading range for $CLF is $0.36 What we often like to do as well is to divide the annual trading range ($18.92) by the current price ($25.63) to provide us with a very basic and generic calculation of how the annualized volatility for $CLF, which is currently 73.8%.
We refer to these as the commonsense metrics which we use as baseline measurements of understanding normal value. When using artificial intelligence, we look to amplify our returns based upon these baseline measurements.
Whenever we trade, we always pay attention to where we are in relation to the 52-week trading range. It is very common to see the 52-week high provide very strong resistance to the market until it is breached. Often when the 52-week high is breached we will see the stock price explode higher very quickly over a very short period.
We like to place all these values on the chart just to get an idea of historical price action. The median Wall Street Analysts ratings at $27 per share is above the 52-week high which we think also bodes very well for future price action.
Best Case – Worst Case Scenarios
When we study the long term 52-week chart we can look at the best case and worst-case scenarios just to get an eyeball perspective of the risk and volatility of this asset. This is worth doing anytime you invest or trade to monetarily understand what the potential risks and rewards have been over the past year.
This simple practical analysis shows us something very unusual. We can clearly see that it has been a super bumpy and volatile ride for $CLF in the last year. While the stock is up 202% on the year it has had 10 very sharp drawdowns. Six of these drawdowns have been 20% or greater. It is very unusual to see an asset move up 200% in a year with this much-repeated downside risk.
Next, we compare $CLF to the broader stock market indexes to get an idea of its relative performance.
$CLF + 202%
S&P 500 Index +34.92%
Dow Jones Industrials +30.2%
NASDAQ +61.06%
Russell 1000 Index +35.64%
So, in $CLF we have an asset which historically has massively outperformed the broader stock market indexes but has also had significantly greater volatility.
The volatility of $CLF is significantly higher than the broader market indexes. Anytime it drops 15% from a recent high you should put it on your radar and wait for the a.i. forecast to turn positive. This has been a winning move for Power Traders repeatedly over the past year.
The Vantagepoint A.I. Analysis
Using VantagePoint Software and the artificial intelligence, traders are alerted to trend forecasts by monitoring the slope of the predictive blue line. The black line is a simple 10 day moving average of price which simply tells you what has occurred in the market. The predictive blue line also acts as value zone where in uptrends traders try to purchase the asset at or below the blue line.
We will zoom in on a smaller time frame of the last two months.
In studying the chart below pay close attention to the slope of the blue line.
Power Traders pay close attention to the relationship between the black line and predictive blue line. The black line is just a simple 10 day moving average. It Is calculated by taking the closing prices of the last 10 days and dividing that sum by 10. All the black line tells you is what has occurred. It tells you where prices have been and what the average price over the last ten days is.
The predictive blue line, on the other hand, utilizes that Vantagepoint patented Neural Network and Intermarket Analysis to arrive at its value. It looks at the strongest price drivers of an asset through artificial intelligence and statistical correlations to determine its value.
Whenever we see the predictive blue line move above the black line, we are presented with an UP-forecast entry opportunity. This is what occurred on October 8, 2021 @ $20.63 per share. Price has rallied $4.85 or 23.36% per share in the last 14 days.
Power traders use the predictive blue line in helping to determine both the value zone as well as the trend direction.
When the SLOPE of the predictive blue line turns higher it become clear that a change in price direction is upon us.
Observe how the SLOPE of the predictive blue line started moving higher a few days before its moving above the black line. A very strong trend was evidenced by seeing that price was consistently closing above the predictive blue line.
Fine Tuning Entries with The Neural Net Indicator
At the bottom of the chart is the Neural Network Indicator which predicts future strength and/or weakness in the market. When the Neural Net Indicator is green it communicates strength. When the Neural Net is Red it is forecasting short term weakness in the market.
We advocate that Power Traders cross reference the chart with the predictive blue line and neural network indicator to create optimal entry and exit points.
Power Traders are always looking to apply both the neural network and a.i. to the markets to find statistically sound trading opportunities. We refer to this cross refereeing as the Double Confirmation setup.
We advise Power Traders to cross reference the predictive blue line with the Neural Net for the best entry opportunities.
VantagePoint Software Daily Price Range Prediction
One of the powerful features in the Vantagepoint A.I. Software which Power Traders use daily is the Daily Price Range prediction forecast.
This forecast is what permits Power Traders to truly fine tune their entries and exits into the market.
Here is the price chart of CLF during the most recent runup featuring the Daily Price Range forecast and the Neural Net Indicator.
In summary, the trend turned up. Prices have surged since that forecast and the trend remained firmly UP. Traders have had numerous opportunities to purchase CLF towards the lower end of the daily price forecast to fine tune their entries.
Intermarket Analysis
Why is $CLF up 202% year over year?
Ask that question to 100 Wall Street Analysts and you will get 100 different answers.
The challenge for all investors and traders is differentiating between opinion and fact.
What makes the Vantagepoint Software truly unique is its ability to perform Intermarket analysis and to locate those assets which are most interconnected that are responsible for driving the price of $CLF higher or lower.
Studying the charts can always provide objective realities in terms of locating support and resistance levels which become very clear on a chart. But we live in a global marketplace. Everything is interconnected. The billion-dollar question for traders is always what are the key drivers of price for the underlying asset that I am trading?
These intangibles are invisible to the naked eye yet show very high statistical correlations.
In $CLF we see a very strong and persistent correlation to Crude Oil and Natural Gas prices and other inflationary hedges. We can also see the other top performing ETF’s which have $CLF as a component.
Small changes in Interest rates, Crude Oil Prices, and the Volatility of the dollar amongst thousands of other variables affect the decisions companies must make to survive in these very challenging times. Trying to determine what these factors are is one of the huge problems facing investors and traders.
There is great value to be had in studying and understanding the key drivers of CLF price action.
By doing so you can often see which ETFs are most likely acquiring $CLF as well as uncovering other industries which affect $CLF price movement. Within this graphic are the most statistically correlated markets which are responsible for price action in $CLF.
Keep in mind that since $CLF is up 202% over the past year these drivers are both positively and negatively correlated. This is an amazing research tool that consistently uncovers future trading and investing gems.
Our Suggestion
The consensus of analysts’ opinions shows that $CLF is still slightly undervalued at current levels.
Earnings for Cleveland-Cliffs are expected to decrease by -45.93% in the coming year, from $6.14 to $3.32 per share. However, since the company crushed its last earning estimate and will be a beneficiary of infrastructure spending it is very possible that $CLF will also crush its next earnings estimate.
Cleveland-Cliffs has not formally confirmed its next earnings publication date, but the company’s estimated earnings date is Thursday, February 24th, 2022, based off prior year’s report dates.
Momentum is very strong on this asset. Since the company recently outperformed on its earnings estimates and will be a major beneficiary of any infrastructure legislation, we think that buying breaks in this asset of 5% or greater is very prudent while practicing very strict money management. The a.i. forecast coupled with the Neural Net has been extremely effective through the double confirmation setup.
Analysts on Wall Street will be forced to upgrade their estimates and the most optimistic analysts will do so very aggressively based upon the last quarter’s results.
$CLF is strengthening its balance sheet and profitability over the next year. However, the volatility in this asset is also significantly greater than the broader market indexes.
We expect consolidation in the $23 to $26 area for several weeks but if the a.i. is bullish we will look for opportunities to swing trade this asset by acquiring shares towards the bottom of the daily forecast and trading channel. Our expectation is Power Traders could look to swing trade for 2% to 3% consistently while this consolidation occurs. Pay attention to the daily price range forecast and position yourself accordingly.
Longer-term we are very bullish on $CLF but until we break through to new 52-week highs this is clearly a swing trading opportunity.
We will look to buy sudden breaks in the market if the a.i. forecast remains UP we will scale in small positions with tight stop losses.
Let’s Be Careful Out There!
Remember, It’s Not Magic.
It’s Machine Learning.
Disclaimer: THERE IS A HIGH DEGREE OF RISK INVOLVED IN TRADING. IT IS NOT PRUDENT OR ADVISABLE TO MAKE TRADING DECISIONS THAT ARE BEYOND YOUR FINANCIAL MEANS OR INVOLVE TRADING CAPITAL THAT YOU ARE NOT WILLING AND CAPABLE OF LOSING.
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