Cliffs Natural Finds Believers

Cliffs Natural Resources (CLF) looks fantastic above $22. The stock has finally turned a corner and made believers of many that a bottom is now in place. The price is breaking out following what we've seen in the Relative Strength Index and stochastics already. Furthermore, distribution is turning as well. I am in some risk-reversals from earlier today, short May 17 puts and long June 7 call spreads, but the price has moved so quickly, it would feel a bit disingenuous to post prices, so it is better to look at the thesis instead. Targets are $24 and $25 in the short term, but the stock has moved so much today, I believe we have to see some consolidation before chasing. Any pullback to the $22 area without violating $22 looks to be a buy.

Otherwise, if I am impatient and absolutely want to get into CLF, then I would be aggressive with covered-call selling if buying here or use a collar. On a collar, consider something like buying May 24 $21 puts for $0.42 and selling the June 21 $27 calls at $0.36. The short interest here is a staggering 23%, so I would want to give the upside plenty of room to move....200 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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