What’s Behind Cleveland-Cliffs Stock Jumping 14% In A Week

Cleveland-Cliffs stock (NYSE: CLF) went up 14% in just the last one week, while the stock is up 12% over the last one month. There were a couple of factors that were behind this rally in the stock. The most important one being the commentary on Reddit that there could be a short squeeze in CLF stock. The company’s stock was already strong in the last one month due to a rise in iron ore prices. The speculation on Reddit about a short squeeze led to more investors covering their short positions to cut down on losses. The other factors (apart from the short squeeze) were strength in global iron ore prices and the company’s update on its plant in Ohio. CLF’s recent release said that it is celebrating six months of “continued operation and production of hot-briquetted iron at the Company’s state-of-the art Direct Reduction plant in Toledo, Ohio.” This announcement has been able to give investors more confidence in the company as it helps ensure it has access to key steelmaking inputs.

In comparison to CLF’s 12% rise, the broader S&P 500 increased 3.7% over the last one month. Now, is CLF stock set to rise further or could we expect some correction? We believe that there is a 60% chance of a decline in CLF stock over the next month (21 trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on CLF Stock Chance of Decline for more details.

Twenty-One Day: CLF 12%, vs. S&P500 3.7%; Outperformed market

(25% likelihood event; 40% probability of rise over next 21 days)

• Cleveland-Cliffs
  CLF
  stock rose 12% the last twenty-one trading days (one month), compared to a broader market (S&P500) rise of 3.7%
• A change of 12% or more over twenty-one trading days is a 25% likelihood event, which has occurred 625 times out of 2516 in the last ten years
• Of these 625 instances, the stock has seen a positive movement over the next twenty-one trading days on 251 occasions
• This points to a 40% probability for the stock rising over the next twenty-one trading days

Ten Day: CLF 10%, vs. S&P500 1.4%; Outperformed market

(21% likelihood event; 49% probability of rise over next 10 days)

• Cleveland-Cliffs stock rose 10% over the last ten trading days (two weeks), compared to the broader market (S&P500) rise of 1.4%
• A change of 10% or more over ten trading days is a 21% likelihood event, which has occurred 523 times out of 2517 in the last ten years
• Of these 523 instances, the stock has seen a positive movement over the next ten trading days on 258 occasions
• This points to a 49% probability for the stock rising over the next ten trading days

Five Day: CLF 14%, vs. S&P500 0.9%; Outperformed market

(8% likelihood event; 44% probability of rise over next 5 days)

• Cleveland-Cliffs stock rose 14% over a five-day trading period ending 6/14/2021, compared to a broader market (S&P500) rise of 0.9%
• A change of 14% or more over five trading days (one week) is a 8% likelihood event, which has occurred 207 times out of 2517 in the last ten years
• Of these 207 instances, the stock has seen a positive movement over the next five trading days on 91 occasions
• This points to a 44% probability for the stock rising over the next five trading days

Out of 625 instances in the last ten years that Cleveland-Cliffs stock saw a 21-day rise of 12% or more, 374 of them resulted in CLF stock declining over the subsequent one-month period (21 trading days). This historical pattern reflects 374 out of 625, or about a 60% chance of drop in CLF stock over the next month.

While CLF stock may have moved a lot, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Compass Minerals vs Southwest Gas shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

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