Seeking Alpha

Robert Edwards'  Instablog

Robert Edwards
Send Message
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
  • Cliffs Natural Resources (CLF) Could Fall Further Before It Bottoms For Good 3 comments
    May 23, 2014 8:09 AM | about stocks: CLF

    If you want a great article that explains the fundamental challenges that Cliffs Natural Resources (NYSE:CLF) faces, click here. CLF is spending about twice as much as its competitors to get iron ore out of the ground. Add that to the fact that they are producing metallurgical coal at a sizeable loss, and the picture is anything but pretty. I had been successfully selling slightly out of the money naked puts in CLF recently, as it traded above and below $18. However, recently the fundamentals have deteriorated and I am now afraid to sell puts.

    With the bleak and still weakening fundamental picture, no wonder the stock is trading in the $16 range now. Catching a falling knife, I did grab a few shares at $16.41 to collect the 15 cents dividend earlier this week, and was able to sell out of the position at $16.50 for a 9 cent profit not counting the 15 cent dividend. However, I am afraid to buy the stock again, and believe it is too soon to sell out of the money puts at this time. Even though CLF is trading at historically very depressed prices, it appears the stock could have a bit further to fall. Check out the weekly chart of CLF here:

    (click to enlarge)

    This week CLF declared a 15 cent dividend would be paid to holders of record on May 20, 2014, when the stock closed at $16.06. That is when I ran the above chart. Post dividend, the stock opened at $15.91 the next morning, and has since rallied a couple days, getting back to $16.52 on the close of May 22, 2014 (not shown on the chart). I ran to chart to see if I wanted to sell some naked puts for income, with the stock trading below $16. I marked with a blue star, every week where CLF paid out quarterly dividends, which of course is every 13 weeks. Looking at the chart, one can see that it is almost never a good time to buy CLF on the week the stock goes ex-dividend. Instead, one would do best to wait about 3 weeks later, to catch the low. It is amazing how CLF usually falls soon after paying a dividend. I believe it could be that certain traders are holding out to collect the dividend and then sell afterwords, further depressing the stock. In any case, I will probably not be buying CLF stock, nor will I be selling puts in the stock for at least 2-3 weeks, to allow time for the stock to stabilize. I will close out this article with a daily chart of CLF that shows how the stock has rebounded off the lows:

    (click to enlarge)

    Disclaimer:

    The thoughts and opinions in this article, along with all stock talk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: CLF
Back To Robert Edwards' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (3)
Track new comments
  • glaserdx
    , contributor
    Comments (236) | Send Message
     
    Thank you for this update especially on selling puts
    23 May 2014, 09:57 AM Reply Like
  • zaw77
    , contributor
    Comments (54) | Send Message
     
    Robert you bought CLF today, right? I would appreciate your update to CLF. I add today in after market.
    30 May 2014, 05:38 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (522) | Send Message
     
    Author’s reply » Just wrote another article, click http://seekingalpha.co...
    30 May 2014, 06:13 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.