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Robert Edwards
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Contrarian daytrading technician who specializes in micro scalping of stocks (using 1 minute bar charts), swing trading of stocks overnight, weekly stock option premium selling, pre-market and post-market psuedo market maker and stealth trading activity, and selling commodity option strangles... More
  • Cliffs Natural Resources, Inc. (CLF) Breaks Through 22 Resistance.....Now What?! 1 comment
    May 8, 2013 9:23 PM | about stocks: CLF

    Today, 5/08/13, Cliffs Natural Resources, Inc. finally blew through stiff resistance at 22 and closed near the day's high at 23.15, up $1.82 for an 8 1/2% gain. Now, where do we go from here. By closely studying the daily and weekly charts on this stock over the past 10 years, I do have some clues as to where we might trade over the next few days.

    First of all, we are now up 4 days in a row, and are somewhat extended on a short-term basis. The easy money on this up move has now been made and it is unlikely CLF will rocket straight to the moon. It is curious that in the aftermarket, CLF has been weak the last several days of this rally (bullish sign for this contrarian) and the next day we closed up. Well, finally this evening we closed up 16 cents at 8:00 p.m. compared to the regular market close, something I take as a sign of capitulation by bears and maybe we now do a bit of consolidation. For tomorrow, 5/9/13, I see one of two scenarios:

    A) A 50+ point higher opening and the high of the day is in the first ten minutes of trading, with 50 points up and 50 points down being the daily range, and a small down close. Friday would be a down day that brings us down to 21.80 to 22 for a weekly close just above 22, a retest of the breakout area. This is the more bullish of the two scenarios I envision, as after retesting the 22 breakout area, what was resistance becomes support. This consolidation move allows another rally move to begin, with 24, 25 to be the next targets. With a surge we might hit 27 or higher and achieve the $10 move off the bottom that I have been predicting for some time.

    B) The more bearish scenario plays out like this: we open near unchanged on Thursday, to only slightly higher, and then trade down near 22, and then spend the rest of the day fighting back to near unchanged, only to close down maybe 15 points lower for the day. Friday would then be a final rally blowoff day and we close the week out hitting 24 or higher and close maybe just under 24. This is the more bearish scenario as the bull move is exhausted with no consolidation and beginning next week we being a choppy move lower down towards 21.50 (50% correction of move from 19 to 24) or 21.00 (62% correction of move from 19.02 to 24).

    In either scenario, what one can conclude is that 23.50 to 24 is formidable resistance for now. Also, if you missed the rally the last 4 days, you should have a chance to buy at a price of 22 down to 21 and don't have to chase. I look for support to show up again at 21.80 and 21.00. Post earnings, CLF hit 22 just 8 trading days ago, only to fall back 2.23 the next day (19.77). Two days later we hit 21.98, only to fall two days later to 19.02, a drop of nearly 3 dollars. Thus $2.20 cents to $3 off any high, should be a good place to buy. I will be buying very small on every single dip this stock makes but again, I will be buying in size at 21.80 and again at 21.00 if allowed to do so in the near future. Happy bagholder here signing off for now. Check back and read this article and I will be posting comments to update my latest ideas as the future plays out.

    Disclosure: I am long CLF.

    Additional disclosure: Although I am flat overnight, by the time you read this, I will already own a few shares.

    Stocks: CLF
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  • Robert Edwards
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    Author’s reply » Well, CLF traded more like scenario "B" which means we are still going up without much consolidation. We had a Japanese Candle 3 gap play going on this week and it was important that we did not retrace more than 50% of the big White Candle of Wednesday, which was about 22.35. Well, Thursday and Friday we stayed above that level and ended up surging on the close---the bearish scenario. I was looking for 24 to be hit, and we only hit 23.58. I would have felt better had we not taken out the 23.50 resistance on Friday's close so that stops would still be intact. Since we took them out today, there is less pressure to gap up on Monday and the market seemed pretty frothy on the close so I got out and am now flat. I will buy again above 24 if continue higher and I can find a safe buy point. More likely we top out Monday or Tuesday and I am hopeful we return to 21.80 or 21.00 so I can buy again in size.

     

    Anyway, it was a great and very profitable week. No complaints.
    10 May 2013, 06:30 PM Reply Like
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