Question 1: When is it a better time to buy Cleveland-Cliffs stock - after a drop or after a rise?Answer:Consider two situations,Case 1: Cleveland-Cliffs stock drops by -5% or more in a monthCase 2: Cleveland-Cliffs stock rises by 5% or more in a month
CLF stock fares better after Case 1, with a 48.3% chance of rise over the next month (21 trading days) under Case 1 (where the stock has suffered a 5% loss over the previous month), versus, a 43.4% chance of rise for Case 2. This would suggest that it is better to buy CLF stock after a recent drop
Try the Trefis machine learning engine to see for yourself how Cleveland-Cliffs stock is likely to behave after any specific gain or loss over a period.
Question 2: Does Cleveland-Cliffs stock have a higher chance of rise after a steeper drop?Answer:Trefis machine learning engine's calculations show that for most stocks, the chance of rise reduces as the drop gets steeper. However, after unusually high drops of -10% or more, there is usually an improvement in the chance of rise. This makes sense intuitively, as markets often overreact to bad news around a company
For CLF stock, the probability of positive returns over the next month (21 trading days) after a drop of N% over the last 21 trading days is detailed in the table below, along with the positive return probability for the S&P500:
Previous 21 days% DropNext 21 daysPositive Return ProbabilityCLF S&P 500-1%49.1%71.1%-3%48.7%73.0%-5%48.3%72.7%-7.5%48.5%78.3%-10%49.0%78.4%
Question 3: What about Cleveland-Cliffs stock chance of rise after a recent rally?
Answer:CLF's probability of positive returns over the next month (21 trading days) after a gain of N% over the last 21 trading days is detailed in the table below, along with the positive return probability for the S&P500:
Previous 21 days% RiseNext 21 daysPositive Return ProbabilityCLF S&P 500+1%45.4%67.8%+3%44.3%68.5%+5%43.4%67.0%+7.5%43.0%68.4%+10%42.0%74.2%