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Another potential earnings short-squeeze trade is international mining and natural resources player
Cliffs Natural Resources (
CLF), which is set to release its numbers on Thursday after the market close. Wall Street analysts, on average, expect Cliffs Natural Resources to report revenue of $1.42 billion on earnings of 61 cents per share.
During the last quarter, this company reported revenue of $1.14 billion and GAAP reported sales were 5.9% lower than the prior-year quarter's $1.21 billion. Also during the last quarter, this company posted non-GAAP EPS of 60 cents per share and GAAP EPS was 66 cents per share, which was 75% lower than the prior-year quarter's $2.63 per share.
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The current short interest as a percentage of the float for Cliffs Natural Resources is extremely high at 36%. That means that out of the 152.10 million shares in the tradable float, 54.80 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 13%, or by about 6.32 million shares. If the bears are caught pressing their bets into a strong quarter, then shares of CLF could easily rip sharply higher post-earnings.
From a technical perspective, CLF is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock recently formed a double bottom chart pattern at $15.50 to $15.41 a share. Following that bottom, shares of CLF have started to uptrend and move within range of triggering a near-term breakout trade.
If you're in the bull camp on CLF, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $19 to $19.31 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 10.48 million shares. If that breakout triggers, then CLF will set up to re-test or possibly take out its next major overhead resistance levels at $22 to $23.50 a share. Any high-volume move above those levels will then put $25 to its 200-day at $27.03 into range for shares of CLF.
I would simply avoid CLF or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day moving average at $18.23 a share with high volume. If we get that move, then CLF will set up to re-test or possibly take out its 52-week low at $15.41 a share. Any high-volume move below its 52-week low is bearish technical price action.