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Robert Edwards
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Contrarian daytrading technician who specializes in locating high probability short term trades while predicting price movement directions with over 85% accuracy. Most of my trading involves either extremely short term micro scalping of stocks or commodities (using 1 minute bar charts), or swing... More
  • I Like Cliffs Natural Resources Because Goldman Sachs Does Not 2 comments
    Mar 22, 2013 11:39 AM | about stocks: CLF

    On Tuesday, March 19, 2013, Goldman Sachs (NYSE:GS) came out and lowered their price target on Cliffs Natural Resources Inc. (NYSE:CLF) from 24 down to 20. The stock has recently been obliterated. After such a hard selloff, I find it curious that GS would further downgrade Cliffs Natural Resources Inc even further? Like lemmings, traders and investors followed the advice and immediately sold. The ending trading volume for Tuesday was over double normal or average trading volume for the stock. Before the advice, the stock had managed to go sideways and hold support for a couple days and maybe have a temporary bottom. That all changed with the public announcement. The stock that was trying to establish a base immediately broke to new 52 week lows. The very day the downgrade was made public, the low of the day was 20.06, so the target was nearly met immediately. Well, after the one day selloff, CLF is again trying to bottom. It may very well be that the GS reiteration of their sell rating and reduction in their price target will mark the low in this stock. Since I like to buy low and sell high, I am now very bullish on CLF and feel all the bad news has been priced in for now.

    I am quite surprised that traders who weathered so much pain already would finally sell in such a deep hole just because GS reduced their target on the stock. Since the target was virtually met, I would hope that some of them bought back in near the lows. I will not join the lemmings and sell out at the bottom. I like to fade downgrades when they are made so late in the game. I am also suspicious of receiving "free advice" from Goldman Sachs or any other large brokerage firm. Because traders act on upgrades and downgrades the brokerage calls usually become self-fulfilling prophecies......for at least one day. However, they often turn out to not be the best advice following the announcement day when the announcement merely reinforces the trend in the stock prior to the call, and the move is very mature. When GS made this last call I used it to scoop up shares at rock bottom prices. I will sell out when this stock corrects back to resistance and GS comes out with a buy recommendation. I have found it pays to think for myself. When a brokerage firm appears to just be piling on when they make a bearish call, I am ready to let the stock break down through support and run out all of the stops, and then buy and play for the recovery. The short interest in CLF is surely quite extreme and at some point those shorts will have to cover. In early December 2012 CLF bottomed at 27.90 and then rallied $12+ on a short covering rally to 40.19. From the $20 area or lower, I expect CLF to rally $12 again to as high as $32, in the very near future.

    Disclosure: I am long CLF.

    Stocks: CLF
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Comments (2)
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  • JohnnyM
    , contributor
    Comments (239) | Send Message
     
    Very observant piece on how the street can squeeze a few more lemons to provide ultimate lows in a seemingly oversold stock. Now in August, the landscape has reversed itself. The zebra shedding its stripes?
    CLF is positioning for one massive squeeze play that should light up the business section headlines for many days.
    Truly a great article Robert. One that will pay off for many weeks, or is that days? CLF and WLT are the place to go fishing before 100% gains off of lows are seen. Buy and hold anyone? jm
    12 Aug 2013, 03:45 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (483) | Send Message
     
    Author’s reply » The original article I wrote had to be watered down to be palatable for the masses and allow me to get it posted on Seeking Alpha without having it censored. I understand their concerns and now I am much more careful how I word things. Now it is apparent that CLF did not ever have to trade under $20 and the downgrades to the bottom should have been upgrades based on valuation. The people to blame is not the analysts but the traders who blindly follow and sell out at the bottom. Traders need to learn to do the opposite of what they see in the press. I buy following downgrades to get a nice bargain. If already in, I will add more to average down. When Barrons Magazine puts a bullish article on my stock, it is an early warning sign to take profits.....dip will follow.
    12 Aug 2013, 09:36 PM Reply Like
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