In the short-run, Cliffs Natural Resources (CLF) could be considered extended, but a powerful saucer bottom pattern on the weekly chart of CLF suggests we could see even higher prices in 2017.
Looking at this one-year daily bar chart of CLF, below, it would be easy to say that we have made a ton of money and we are booking our profits and walking away. Thank you very much. You could have bought CLF at $2, $3 or $5 just as recently as last month and still have made impressive percentage gains, but this bull move seems far from over.
CLF is trading above the rising, 50-day and 200-day moving averages. Prices could be stretched on the upside compared to the 200-day line, like they were in early August, but our other indicators are in fine shape. The daily On-Balance-Volume (OBV) line has been trending all year, and confirms the positive price trend with signs of aggressive buying and accumulation. Momentum turned up with prices and is not diverging.
We mentioned a saucer bottom pattern at the beginning of this article, and here it is in this three-year weekly chart, below. This is no small pattern, as the bottom is at least two years in the making. Prices are above the rising, 40-week moving average line, which is bullish, and you can see two buying opportunities as CLF dipped to test the average line in May and October. Now look at the volume pattern.
In the left part of the saucer in 2015 the volume is relatively light, and in the right half of the saucer the volume is very heavy -- just what we want to see. The weekly OBV line did correct in August, September and October but is pointed up again. The trend-following Moving Average Convergence Divergence (MACD) oscillator turned bullish in May and just generated a fresh go-long signal. $14 is our next major upside price target for CLF. Risk a close below $7.
