Is Cliffs Natural Resources Looking Oversold According to Its Technicals?



Technical indicators

In this article, we’ll discuss the technical indicators for Cliffs Natural Resources (CLF) and its peers. Traders and investors look at technical indicators when making market entry or exit decisions.

Moving averages and the RSI (relative strength index) are among the most widely used technical parameters. Generally, an RSI below 30 signifies an oversold position, and an RSI above 70 is associated with an overbought position.

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Is Cliffs Natural Resources oversold?

Based on its December 23, 2016, closing price, Cliffs Natural Resources (CLF) is trading 14% above its 50-day moving average but 7% below its 20-day moving average. Its RSI is well above 30, which points to an oversold position.

CLF had a 14-day RSI of 28.8 based on December 23 prices. The stock has corrected 16% in the last 14 trading days, which dragged the stock from an overbought to an oversold position. Investors should note that stocks can remain oversold or overbought for an extended period of time. Although technical indicators can suggest a pop in prices, it might not come immediately.

Technicals of CLF’s peers

Cliffs Natural Resources’s (CLF) peers in the US steel sector have also corrected from their post-Trump win highs. ArcelorMittal (MT) is trading 6.3% below its 20-day moving average and 1.6% above its 50-day moving average.

However, the correction in CLF’s peers is not as steep as it is in Cliffs Natural Resources. U.S. Steel (X) is still trading 29% above its 50-day moving average with a 14-day RSI of 52.6. AK Steel (AKS) has a 14-day RSI of 50.8. ArcelorMittal (MT) and Steel Dynamics (STLD) currently have RSIs of 32.3 and 41.4, respectively.

Although the current commodity (DBC) rally seems to be providing momentum to all mining stocks, we believe that investors should look at these investments from a slightly longer-term perspective to see which stocks can sustain this price advantage.


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