Cleveland-Cliffs Shares Signal Potential Rebound Despite Year-To-Date Decline
Analysts at Schaeffer's highlight historical success rates for the 80-day moving average crossover, while short interest rises to nearly 15 per cent of the float.
Shares of Cleveland-Cliffs Inc (CLF) are currently trading 4.5 per cent lower at $10.64, continuing a choppy trading pattern following a recovery from mid-March lows. Despite a positive first-quarter report that provided some initial relief, the steel producer remains down by nearly 20 per cent for the year to date. However, technical analysis is now pointing toward a potential upward surge, with the stock recently crossing above its 80-day moving average.
According to Rocky White, Senior Quantitative Analyst at Schaeffer's, this specific crossover event has occurred 17 times over the last decade. In 71 per cent of those instances, the stock was higher one month later, averaging a gain of 5.3 per cent. White notes that a similar move from current levels would see shares return to near February highs, offering a target for investors watching the technical setup.
The potential for a sharp price increase is compounded by elevated short interest, which has risen by 16.5 per cent over the past two reporting periods. This figure now represents 14.9 per cent of the stock's available float, creating conditions where a rally could trigger a short squeeze. At current trading volumes, it would take short sellers approximately five days to cover their positions if the bullish trend continues.
Schaeffer's Volatility Scorecard (SVS) for Cleveland-Cliffs stands at 83 out of 100, indicating that the stock has consistently exhibited higher volatility than its options have priced in over the past 12 months. This metric suggests that the market may be underestimating the potential for significant price swings in either direction.
While the historical data provides a compelling case for optimism, it is important to note that past performance does not guarantee future results. The projected move to February highs is contingent on the continuation of the current bullish trend and broader market conditions. Investors should remain cautious, as the timeline for a potential short squeeze is based on average trading pace and may vary significantly depending on liquidity and sentiment.
Ultimately, while the immediate trading environment sees shares under pressure, the confluence of a bullish technical signal and high short interest suggests Cleveland-Cliffs could be poised for a notable rebound in the coming weeks.
