Cliffs Natural Resources Inc (NYSE: CLF ) - Following the divestiture of its coal assets in 2015, CLF is now a pure-play iron-ore producer
This small-cap company, which is one of the largest suppliers of iron ore pellets to the North American steel industry, was last reviewed by the Trade of the Day on Sept. 8, 2016 . I suggested buying Cliffs Natural Resources at $6 with a target of $7.50 for an objective of over 22%. But in the following quarter, CLF stock buyers flocked to the stock, driving it to a high of almost $11 on Dec. 8.
The rally followed a Standard & Poor's increase in late November to a 12-month target of $11 from $9. It cited "an improved outlook for higher steel demand" and the resulting positive impact of CLF's high financial leverage as reasons for the increase.
Yesterday the focus of President Donald Trump's message was to insist on more U.S. jobs, and to promote that goal - while seeking energy independence - by signing the Keystone XL Pipeline and the Dakota Access pipeline deals "with re-negotiated terms."
This may be a signal that the low inventory levels at metal service centers, recently cited by S&P, will be filled in due time by new steel orders.
As noted on the chart, CLF stock topped at $10.90 in early December and then fell to its July high at $8.45 in January.
The July high is a key support line for December's extended flag formation. Flags are bullish indicators, the most recent finding a bottom at the conjunction of CLF's 50- and 20-day moving averages at $8.96. Yesterday's high and close broke the bearish resistance line of that formation.
There is a high probability of a continuation of the breakout. Thus buy CLF at over $9 with a trading target of $11. However, with the wind now at its back, this stock could advance much quicker and with a higher target, thus long-term investors seeking extended returns may also consider CLF.
As of this writing, Sam Collins owns shares of CLF stock.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.