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Cliffs Natural Resources: What Will Drive Performance after 2Q17?

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Part 10
Cliffs Natural Resources: What Will Drive Performance after 2Q17? PART 10 OF 11

What Technical Indicators Point to for Cliffs and Its Peers

Technical indicators

In this part of the series, we’ll look at the technical indicators for Cliffs Natural Resources (CLF) and its peers. These indicators help traders and investors make market entry and exit decisions.

What Technical Indicators Point to for Cliffs and Its Peers

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In this part, we’ll look at moving averages as well as the RSI (relative strength index). The RSI score, which measures speed and price movements, ranges from zero to 100. A score below 30 indicates an oversold position, while a score above 70 suggests an overbought position.

Is Cliffs Natural Resources overbought?

Based on its August 1, 2017, closing price, Cliffs Natural Resources (CLF) is trading 11.4% and 1.5% above its 50-day and 20-day moving averages, respectively. While its moving averages show the stock is overbought, its RSI score is 53.1, which doesn’t show an overbought position yet.

CLF’s recent 2Q17 results were a beat on market expectations, but the downgrade to its earnings guidance for 2017 led to a fall in the stock. On the positive side, the recent surge in seaborne iron ore prices led to an upturn in iron ore miners’ stock prices, including CLF stock. The recent surge in CLF stock has led the price to cross its moving averages.

Investors should note, however, that the overbought situation doesn’t mean these stock prices will revert lower automatically. In fact, they could remain oversold or overbought for long periods of time.

Technicals of CLF’s peers

Cliffs Natural Resources’ peers (XME) in the US steel sector have also risen in the last few weeks. ArcelorMittal (MT) and U.S. Steel (X) are trading 3.3% and 12.9%, respectively, above their 50-day moving averages.

AK Steel (AKS), on the other hand, is trading 13.0% and 12.8% below its 50-day and 20-day moving averages, respectively. Its RSI is currently 40, which is approaching the oversold level of 30.

One of the most positive catalysts for CLFand its US-based steel peers is the favorable outcome of the Section 232 investigation. While a favorable outcome could prop up these prices, a less-than-favorable outcome could mean a downside to these stocks.

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