During the Lightning Round segment of "Mad Money" Tuesday a caller asked host Jim Cramer about steel producer Cleveland-Cliffs (CLF) .
"We only have two steel producers in this country. I want to buy this stock and put it away," was Cramer's response.
Let's check the charts. In our review of June 10, we wrote: "Continue to hold longs from previous recommendations. Raise stops to $19 from $16.50. The $35 area is our first price target now followed by $76."
In this updated daily bar chart of CLF, below, we can see that traders should still be long CLF as it trades above the rising 50-day moving average line and has not declined to our recommended $19 stop. The slope of the 200-day line is positive. Trading volume has been more active since February, but the movement of the On-Balance-Volume (OBV) is a problem.
The OBV line has been in a decline from early April and has diverged from the price action. Sellers appear to be more aggressive. The Moving Average Convergence Divergence (MACD) oscillator has been above the zero-line for most of the past 12 months, but it has not been "robust."
In this weekly Japanese candlestick chart of CLF, below, we see a mixed picture. Prices are in an uptrend above the rising 40-week moving average line. The candle patterns do not present themselves as bearish at this point in time. The weekly OBV line has improved from May but it is not in new high ground. The MACD oscillator is above the zero line but in a position that it could turn up or down in the weeks ahead.
In this daily Point and Figure chart of CLF, below, we can see a potential upside price target in the $29 area.
In this weekly Point and Figure chart of CLF, below, we can see a $33 price target.
Bottom line strategy: A rising stock price with a declining OBV line is a problem for me. Technicians like to see volume expand in the direction of the trend and that has been happening this year. Is the OBV indicator flawed? I don't know the answer to it, but I would recommend raising stops to $19.75 from $19. I want to stand closer to the exit door.
