This week, Talking Numbers looks at the best and the worst of 2013. Today, we focus on Cliffs Natural Resources, one of the worst performing stock in the S&P 500 index. Is it a turnaround story waiting to happen?
It's one of the worst stocks in the S&P 500 index – Cliffs Natural Resources. While the market's benchmark is up 27% in 2013, Cliffs is down 37%, making it the second-poorest performer in the entire index.
But could Cliffs do what last year's second-worst S&P 500 performer did?
Advanced Micro Devices (AMD) was down 56% in 2012, fairing only better than Apollo Group's loss of 61%. However, so far in 2013, AMD is up 52%. That still means it's one-third lower than where it was at the start of 2012, but it's a start.
Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, believes the Cliffs can pull off a similar feat. "I love the chart of Cliffs Natural Resources," says Ross.
According to Ross, the 50-week moving average offers a trading strategy he believes works well for this particular name. When the stock moves below the 50-week average, traders should sell; when it moves above the 50-week, they should buy, says Ross.
"This has had a remarkable track record of giving you great buy and sell signals," says Ross "By 'great' I mean profitable."
Cliffs has just begun broken above its 50-week moving average. Along with a reverse head and shoulders pattern, the technicals have made Ross a bull on Cliffs.
"You want to be a buyer here on that breakout," says Ross. "I think the stock could double and trade at $48."
CNBC contributor Andrew Busch, editor and publisher of The Busch Update, is more pessimistic on Cliff's short-term prospects.
"The big 800-lbs gorilla in the room is China," says Busch. "That's what's driven this company's stock price because it creates steel and coal and obviously, that's used for a lot of infrastructure projects."
With China keeping its growth rate down to between 7% and 7.5%, demand for Cliffs' output.
"The question is can the global growth picture be really driven by what's happening in the United States and drive more steel demand," says Busch. "So far, I'm not sure it's going to drive Cliffs to double in 2014."
To see more of Ross' trading strategy and what Busch thinks is next for Cliffs Natural Resources, watch the video above.
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- Cliffs Natural Resources