Bull & Bear: Cliff's Natural Resources (CLF)

Shares of Cliffs Natural Resources CLF are cruising lower this afternoon (Along with the overall market) to the tune of 4.92%, trading at $94.24. With shares now sitting on the 20-day moving average, a trendline that has been a terrific buy point for the past six months, one has to wonder if today is a day to buy or a day to sell.

Bull: Cliffs Natural Resources' six-month chart largely tells the whole story; this is a name that is volatile, though in a clear bull trend. The 20-day moving average has been a clear support level for the name, allowing the chart to back and fill and move to new highs.

A bull has to wonder why this case would be any different from the other times and would consider the following trade: Buy the April 2011 $100/110 call spread for a net debit of $2.36. This trade voices the opinion that shares will rebound off of support and look to test (And ultimately break through) upside resistance. Max gain is $7.64 (+324%); max loss is the net debit.

Bear: Bears have been known to maul this name in a fast and furious fashion on the past six months. Though all retracements have turned out to be buy levels, the corrections, if timed correctly, have been fruitful. One fact that the bears can hang their hats on is that shares recently did not break through the high-volume $101.62 top and have since fallen sharply.

This looks like a short-term double top, which could lead to bulls pulling back their bids. If this happens, the 20-day support would be broken and the stock's medium-term momentum would be in jeopardy. It would not be out of the ordinary for shares to correct to the $80.00 level rather quickly.

If you are bearish, you might want to consider the following trade: Buy the April 2011 $90/80/75 put tree for a net debit of $1.86. The $75.00 is major support and would likely be an Alamo for bulls. Max gain on the trade is $8.14 (+438%), which is taken when shares trade between $80.00-75.00. Gains taper off below $75.00, while losses are not accrued until shares trade south of $70.00.

Cliffs Natural Resources Inc., 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.