CLF is a falling knife, continues to bleed every investor trying to catch it
13 Dec, 201813 min read
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CLEVELAND-CLIFFS INC. was among the worst performers on Thursday. It fell by -1.67% to close at 8.23. It is currently trading -36% below it's 52 week high of 12.91.
Buy-and-Hold investors in CLF experienced a maximum drawdown of -36.25% over the last three months. It fell by -28.5% during this strong bearish trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +32.87%.
CLF has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 12 Jan, 2016 to 25 Sep, 2018. Over the last 2 years 11 months and 9 days, CLF outperformed the SP500 index on 51% days.
During the last three months CLF was mostly loss making and delivered on average -0.48% per day. It's best return during this period (of +6.53%) was on Wednesday, 31 Oct, 2018. While it's worst loss in the same period (of -8.94%) was on Wednesday, 24 Oct, 2018. The longest stort-term trend during this period was 4 losing days, which started on 4 Dec, 2018 and ended on 10 Dec, 2018. This bearish trend lost -8.33% of investor capital.
During the last year CLF had 5 profitable months and 7 loss making months. CLF returned profits in fewer months than SP500 index. CLF significantly outperformed SP500 index in Jul 2018, when it returned +26.94% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. CLF had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Oct 2018 to Dec 2018) during which period it delivered -40.8%.
But having said that, what's happening with campaign finance reform and our political culture is devastating.
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CLF is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in CLF's volatility from 17 Oct, 2018 to 24 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 14 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that CLF has significant negative skewness in it's return distribution. This indicates that CLF is very risky for short-term investment and can significantly underperform for long durations.
Investors trading in CLF derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than CLF. Therefore, SP500 must receive a lower allocation than CLF in your portfolio. SP500 index usually has shorter drawdown period than CLF.
On a general note (since you are interested in CLF), three instruments that deserve special mention are AYTU, ~SMALLCAP and NSPR. They have all outperformed the market and must be closely watched for investment opportunities.
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