Cleveland-Cliffs stock (NYSE: CLF) has seen a formidable rise of 70% over the last six months and currently trades at $24 per share. The recent rally was driven by a sharp recovery in global steel prices as the gradual lifting of lockdowns has led to expectations of faster economic recovery and higher steel demand. Economic stimulus packages announced in the U.S. and other economies along with the clearance of the infrastructure bill in the U.S. Senate are also expected to aid the demand for steel from the construction and automobile sectors. Also, with the lifting of lockdowns, the company’s operations are getting back on track and shipments are likely to rise as supply constraints ease. Shipments will also receive a sharp boost in 2021 following the acquisition of ArcelorMittal’s U.S. operations in late 2020. That the steel industry is slowly getting back on track is also clear from the rise in capacity utilization levels. The U.S. raw steel capacity utilization for the week ending 21st August 2021 was 85%, which is significantly higher than the 66% recorded in the prior year period, which indicates that there are strong signs of a rebound in activity in the steel sector.
But will CLF stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for CLF stock average over 8% in the next one-month (21 trading days) period after experiencing a 70% rise over the previous six-month (126 trading days) period. Also, the stock has close to 60% probability of giving positive returns over the next one month. But how would these numbers change if you are interested in holding CLF stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test CLF stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
MACHINE LEARNING ENGINE – try it yourself:
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IF CLF stock moved by -5% over five trading days, THEN over the next 21 trading days, CLF stock moves an average of 1.3 percent.
Some Fun Scenarios, FAQs & Making Sense of CLF Stock Movements:
Question 1: Is the average return for Cleveland-Cliffs stock higher after a drop?
Consider two situations,
Case 1: Cleveland-Cliffs stock drops by -5% or more in a week
Case 2: Cleveland-Cliffs stock rises by 5% or more in a week
Is the average return for Cleveland-Cliffs stock higher over the subsequent month after Case 1 or Case 2?
CLF stock fares better after Case 2, with an average return of 1.2% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.8% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Cleveland-Cliffs stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold Cleveland-Cliffs stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For CLF stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although CLF stock appears to be an exception to this general observation.
CLF’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Cleveland-Cliffs stock by changing the inputs in the charts above.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market since 2016.