First thing I need to say is that this chart is very long term based, more than one year.
CLF is a mining company that specializes in the mining and beneficiation of iron ore and the mining of coal. Some of its competitors are VALE, BHP and RIO. Its chart is best correlated with VALE. What makes this particular stock more interesting than its competitors (all lost a lot of their value due to the drop in iron ore prices) is the surge in volume. Volume in CLF is double what it used to be 2 years ago, and price is going sideways. This means that someone is buying this stock for some reason. I always thought until now that something important fundamentaly happens and then you can see it on the chart. Well, recently, I started to believe that you can see fundamentals through technical analysis, before the data is released to the public. That might be the case here, cause for some reason, as I said, someone is buying, and it looks like CLF is accumulating.
Looking at the chart, the moving averages and price action is telling us that maybe the downtrend is over, both moving sideways. There is a Double bottom with a huge class B bullish divergence on the weekly chart! This usually is a very strong signal. There is also a slight divergence on the histogram, poiting out that bears lost power.
Major support is around 15, and as long as we stay above, my bias is bullish. A close below this level and I'll have to reasses my plan, and probably cancel it. First target would be 28$, which is the double bottom neckline, and also previous support from November 2013. The Double bottom target is at 40, where there is a strong resistance and a fib level. Further away, major resistance stands at 47$, a level that coincides with a fibonacci cluster.
I never traded for the long term, so I preffer to trade on the daily, keeping my bullish bias from the weekly. I will be posting charts with the daily setups that I see, only on the long side.
Good observations. Volume and volatility is always highest when an index or stock bottoms. It's basically intense indecision between market players, where some think it will continue lower while others like it at a given level. Provided the company is a going concern, the share price will rise eventually.
For example, you will see intense volume on some days with practically no share price movement. Just as you say...traders, institutions, or individual investors are accumulating. It takes time for a price floor to be determined especially when there is blood in the streets...(business health is objective, sentiment is subjective).
CLF, VALE, and PBR are three of my top picks in this market. I've been slowing accumulating at these levels (about 30% of AUM).
vlad.adrian
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Thank you! My favorite is CLF, VALE is almost identical, but there's no rise in volume, so probably something is going on in CLF. I don't know what is PBR though, I couldn't find it :D
18.03.2014