Today, I'm going to be sharing a chart setup I think has a lot of potential based on some of the technical studies I use here at MarketClub.
The chart I am analyzing is Cliff Natural Resources (NYSE:CLF).
At number 1, I have drawn a downtrend line from the high around $100, all the way down to where the trend line was broken in late July of 2013. Generally, the longer the trend line, the more powerful the move when it is breached. This trend line on CLF lasted a little over two years and touched three distinct points, confirming it as a valid trend line.
Learn more about trend lines here.
When the stock of CLF broke out at number 3, it also coincided with our monthly Trade Triangle turning green and giving a major buy signal on CLF at $23.75.
At number 4, it would appear that CLF has excellent support around the $20 area. I would not be surprised to see some further backing and filling and perhaps a pullback to the original buy point of $23.75. Should this occur, I would view this as an excellent opportunity to purchase the stock. As with any trade, I would use stops on this position to protect capital.
I have already drawn the Fibonacci retracement potential of this stock at number 5 on the chart. A 23.6% retracement would bring this stock back up to $35.63, while a 50% retracement would take CLF back to the $47.93 level. Should this occur, it would represent a potential 100% return on the original buy point at $23.75.
To recap, here is what I like about the chart setup on Cliff Natural Resources (NYSE:CLF):
• CLF has broken above a 2-year downtrend line.
• All of the necessary Trade Triangles are in place.
• Support appears to come in around the $20 area.
• Fibonacci retracements look very positive.
Keep in mind, there are always things that can go wrong with any trade. It is very important to have an exit plan and a stop loss strategy to protect your capital.
What do you think of this chart setup on CLF? Do you agree or disagree with my chart analysis? I would like to hear your feedback on CLF or any other stock that you're looking at.
Every success in your trading.