Stock Of The Day: Tariffs Could Mean A New Bull Market For Cleveland Cliffs

Shares of Cleveland-Cliffs Inc. CLF are trading higher Monday. This follows President Trump's vow to impose a 25% tariff on steel and aluminum imports.

Investors believe that this will help domestically based companies like Cleveland-Cliffs.

The stock could be breaking out and the downtrend that began a year ago may finally be over. This is why it is our Stock of the Day.

When a stock is trending lower, the market is full of ‘buyer's remorse'. People buy shares and come to regret doing so when the stock falls below the price they paid for it.

When this happens, many of these traders and investors decide to hold on to their losing positions. But they also decide that if they can eventually sell them at the same prices they paid for them and can get out of the position at breakeven, they will.

As a result, if the stock eventually rallies back up to the buying price, they place sell orders. Sometimes, there are so many of these sell orders that a price level that had been support can convert into a resistance level.

This action can be seen on the chart of Cleveland Cliffs.

Read Also: Corporate America’s Best Earnings In 3 Years: Will Tariffs End Wall Street’s Honeymoon?

Back in late April, the stock suffered an aggressive meltdown. But when it reached levels around $16.45, the buyers came out of the woodwork and put a floor underneath it. $16.45 became a support level.

Then in July, the support was broken and the price dropped lower. When this happened, many who paid around $16.45 for shares regretted doing so. A number vowed that if the stock got back up to $16.45, they would place sell orders so they can get out at breakeven.

There were so many of these orders that it created resistance at the price that had been support.

A similar price action occurred around the $14.25 level. In June it had been support. Then it turned into resistance in August and November.

But the tide may now be turning.

As you can see on the chart below, the $10.85 level was support in September and November. Recently, this level has been resistance. But the tariff news could be making the stock break this resistance.

When markets reach bottoms, buyer remorse fades. Levels that had been support may stop becoming resistance. This appears to be the case here. It could mean that Cleveland-Cliff's year-long downtrend is over and a new bull market is forming.

Read Next:

• Momo Crowd Buys Stocks On Trump Imposing New Tariffs, China Frees Up Billions To Buy Gold

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