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Cleveland Cliffs (CLF) Stock Fell 31% From Its April High. What’s Next?

Simon Mugo trader
Updated 27 May 2022

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Key points:

  • Cleveland-Cliffs (CLF) stock has fallen 31% from its April high.
  • However, the CLF stock looks like a buy at current prices.
  • Demand for the firm’s iron pellets and steel products is relatively high.

The Cleveland-Cliffs Inc (NYSE: CLF) stock price fell over 31% from its April high of $34 in a classic “buy the rumour, sell the news” scenario. The stock had rallied almost 50% since the year started, and many investors thought it was overbought.

Also read: The Best Nickel And Nickel Mining Stocks To Buy Now.

Therefore, many existing shareholders chose to liquidate their position, triggering a significant selloff. The downtrend was further accelerated by the overall selloff in US stock markets. The S&P 500 fell 8.8% during the same month.

The question on most investors’ minds is, “is the downtrend over?” The short answer is that the worst of the downtrend is over for now. CLF stock bounced just above the long term support level at $19.68 and is currently headed higher.

However, as a savvy investor, I would like to see CLF stock hit the long term support level and bounce off it before buying. Unfortunately, since it has started rising before hitting this crucial level, we will probably see the price reverse course and head lower to the critical level before a proper rally can begin.

Cleveland-Cliffs’ fundamentals are pretty solid, given that the company specialises in the mining, pelletising and beneficiation of iron ore and steelmaking. Moreover, with global demand for steel rising and Russia’s steel being cut off from the global markets due to western sanctions, demand for CLF’s products is set to remain high for the rest of the year.

The company reported a 50% revenue surge to $6 billion during the first quarter and expected and raised its full-year guidance. However, the stock still fell off, making it cheap at current prices.

CLF shares are trading at four times its 2022 earnings estimates,w which is pretty cheap compared to some of the tech stocks trading above 20 times their future earnings potential. Hence, there is much room for CLF stock to rise, but a broader market consensus must drive such a rally.

Aggressive traders may buy CLF stock now, while more conservative traders could wait for a retest of $19.68 before buying. However, there are no guarantees that we will get this retest.

*This is not investment advice. Always do your due diligence before making investment decisions.

Cleveland-Cliffs stock price.

Cleveland-Cliffs stock price 27-05-2022
Source: Tradingview

The Cleveland-Cliffs stock price has fallen 31% from its April high of $34 to its current price of $23.46.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading