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TheStreet Open House

5 Big Stocks That Could Drop in May

Stocks in this article: ADSKBMOCLFKOPK

Cliffs Natural Resources

Cliffs Natural Resoures ( CLF) is another small name that's been seeing huge trading activity lately. This stock has gotten summarily shellacked in 2013, nearly halved since the start of trading this year. And while it looked like CLF investors were due for a reprieve, the latest short-term price action begs to differ.

>>How to Use a Stock Screener to Scan for Hot Stocks

CLF is forming a head and shoulders top like OPK and ADSK - the big difference with this chart is the fact that Cliffs' setup is extremely short-term. The stock's slanting neckline comes in at $20 as I write.

Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. After all, head and shoulders setups and other pattern names are a good quick way to explain what's going on in this stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares. The neckline at $20 is a place where CLF has been able to catch a bid -- it's a price level that, if broken, tells us that sellers have overwhelmed any buying pressure down at that price.

That's why it makes sense to run when the neckline is broken, even if the setup only has short-term trading implications.

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