NEW DIRECTIONAL CALL PLAYS
Cliffs Natural Resources - CLF - close: 66.36 change: +1.16 stop: 61.85
Target(s): 68.75, 70.75
Key Support/Resistance Areas: 71.25, 69.00, 65.00 62.00
Current Option Gain/Loss: Unopened
Time Frame: 1 to 2 weeks
New Positions: Yes
Cliffs Natural Resources Inc. (Cliffs), formerly Cleveland-Cliffs Inc, is an international mining and natural resources company. The Company is a producer of iron ore pellets in North America, a supplier of direct-shipping lump and fines iron ore out of Australia, and a producer of metallurgical coal. The Company's operations are organized according to product category and geographic location: North American Iron Ore, North American Coal, Asia Pacific Iron Ore, Asia Pacific Coal and Latin American Iron Ore. In North America, it operates six iron ore mines in Michigan, Minnesota and Eastern Canada, and two coking coal mining complexes located in West Virginia and Alabama. Its Asia Pacific operations are comprised of two iron ore mining complexes in Western Australia, serving the Asian iron ore markets with direct-shipping fines and lump ore, and a 45 % economic interest in a coking and thermal coal mine located in Queensland, Australia.
Why We Like It:
Manufacturing data from around the world was better than expected today, including here in the US. Companies like CLF should benefit from an uptick in manufacturing because the manaufacturers need materials such as coal and iron ore to make their products. Technically, CLF has been trending higher since its lows in July and looks poised to move back towards its highs from early October if the broader market cooperates. The stock also broke and closed above a short term downtrend line today. Considering the overbought market conditions I consider this is an aggressive play, however, the trend in CLF is up and until proven otherswise the trend should continue. I suggest we use a trigger of $65.40 (near today's lows) to launch bullish positions. Our targets are +5% and +8% higher than our trigger.
NOTE: This is a good hedge against our short MTL position. I also consider this an aggressive trade so small position size is suggested to control risk if the stock reverses lower.
Trigger = $65.40
Suggested Position: Buy 2010 November $70.00 CALL, current ask $2.89
Entry on November XX
Earnings Date More than two months
Average Daily Volume = 4.3 million
Listed on November 1, 2010