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Cleveland-Cliffs and Peers: Taking a Look at Technical Indicators

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Dec. 15 2017, Updated 9:00 a.m. ET

Stock returns

Among all the iron ore miners as well as US steel stocks, Cleveland-Cliffs (CLF) has given the most negative return in the trailing three months, amounting to -19.5%. While most of the company’s exposure is to the US domestic steel market, the seaborne iron ore prices play a major role in shaping the market sentiment for the stock. Higher US steel imports, the company’s volumes guidance cut, as well as the volatility in iron ore prices, have led to the decline in the stock price. In comparison, U.S. Steel (X), Steel Dynamics (STLD), and ArcelorMittal (MT) have returned 23.5%, 19.5%, and 16.7%, respectively. AK Steel (AKS) is the only other stock exposed to the US steel sector, and it has given a negative return of 9.2%.

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Cleveland-Cliffs’ technicals analyzed

Based on its December 8 closing price, Cleveland-Cliffs (CLF) is trading 2.7% below its 50-day moving average and 1.7% above its 20-day moving average. Its RSI (relative strength index) level is 55.2.

The current level indicates neither an oversold nor an overbought position for the stock. CLF stock has already fallen 14.0% since its 3Q17 earnings were released.

The downside from here would depend mostly on macro factors such as the steel production and consumption levels in China, US steel prices, and actions affecting US steel imports.

Peer comparisons

As you can see in the above graph, among CLF’s peers (SLX), Rio Tinto (RIO) is trading quite close to the oversold RSI level of 70. Conversely, U.S. Steel (X) has significantly overshot the overbought RSI level of 70 to trade at 91.5. ArcelorMittal (MT) and Nucor (NUE) also seem to be overbought, based on their current RSI levels. While there could be a short-term pullback in these stocks’ prices, investors should note that stock prices can remain oversold or overbought for long periods.

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