NEW BEARISH Plays

Cliffs Natural Resources - CLF - close: 30.01 change: -0.68

Stop Loss: 31.05
Target(s): 25.25
Current Gain/Loss: unopened

Entry on November xx at $ xx.xx
Listed on November 27, 2012
Time Frame: 4 to 6 weeks
Average Daily Volume = 7.7 million
New Positions: Yes, see below

Company Description

Why We Like It:
CLF is in the basic materials sector. The company mines iron ore and metallurgical coal. Investors are bearish on the stock with traders selling the rallies. The recent sell-off got a boost when Goldman downgraded CLF on Nov. 20th. Now CLF is sitting on multi-year lows.

I would classify this as a higher-risk trade because so many investors are bearish on CLF. The most recent data listed short interest at almost 20% of the 141 million-share float. That does raise the risk of a short squeeze but the trend is clearly down.

I am suggesting small bearish positions if CLF breaks down to a new low. The Nov. 21st low was $29.80. We'll use a trigger at $29.70. If triggered our target is $25.25. (FYI: The Point & Figure chart for CLF is bearish with a $14 target.)

NOTE: You may want to use the put option to limit your risk.

Trigger @ 29.70

Suggested Position: short CLF stock @ (trigger)

- (or for more adventurous traders, try this option) -

buy the DEC $30 PUT (CLF1222x30) current ask $1.57

Annotated chart: