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Pain For United States Steel Corp (X) And A Cliff For Cliffs Natural Resources (CLF)

Apr. 26, 2017 2:24 PM ETX, CLF1 Comment
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

United States Steel Corp (X) announced earnings, after market close on 4/25/2017, which significantly missed analysts' expectations with a 1Q17 loss of ($0.83) per share compared to analyst expectations of a positive $0.34 per share. As a result the stock has been hammered during the morning trade down approximately (25%).

A revised downward outlook is also not helping the stock which is approaching a level just prior to the election. The election results provided a massive run up, doubling the stock price from $20.00 per share in early November 2016 to just over $40.00 per share mid-February.

The big correction appears to be in and this will be a fun stock to watch over the next few years as they try and clean up their balance sheet in a low price commodity atmosphere and a rising rate environment.

While the opportunity for profit on United States Steel Corp has likely passed, a new trading idea has presented itself in Cliffs Natural Resources (CLF).

Cliffs Natural Resources (CLF) is a mining and natural resources company which focuses on iron ore pellets for North American steel manufactures. This company has been on a tear in the last 12 months with a 52-week range of $2.77-12.37. As of 4/26/2017, is trading at $7.29 and is expected to report earnings tomorrow 4/27/2017. Based on United States Steel Corps' earnings results, shareholders were a little jumpy and who wouldn't be with the Company reporting total debt of $2.175B with $1.924B of assets, choppy cash flow historical results and a heavy capital intensive industry.

In aftermarket trade, 4/25/2017, experienced a (5.0%) decline and opened at $6.85 per share on 4/26/2017 down from the previous close on $7.23 per share. The stock recovered all of that loss and then some by the mid-afternoon trade, currently at $7.26 per share.

If experiences anything close to a movement like then a Put Option may be an appropriate trade idea. Currently, April 28th '17 Put options with a $7.50 strike price are priced at $0.46 per share. This results in profit for the option if the stock price were to drop below $7.04 prior to close of market 4/28/17.

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

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