CLF's Instability

Hey guys! CLF registered on my daily market scan for persistent instability, and I think it is ready for a reversion in price back to $20.63. [Quick summary: VoEx measures the price-directing forces on a stock and can indicate when these forces become too heavily involved in a stock's price-action. Graphically, VoEx-daily (magenta) indicates the day-to-day changes in VoEx and VoEx-trend (tan) indicates the over-all trend. VoEx indicates the greatest level of stability when it resides within the horizontal lines, shown below. When VoEx is above the line it is said that the stock has overly-inhibitory forces, and when it is negative, it is said to be overly-propagated. Let's have a look:] The daily market scan produced the following output: https://i.imgur.com/a3NsnZQ.png Since the 2021-10-08, CLF has been persistently unstable with the starting price at $20.63. This is a particularly interesting start-price for CLF, as I think that is where the price is headed back to. [Nerd note: When looking at when a stock is persistently unstable and mapping the distribution of returns from the start to the end of the instability, you get: https://i.imgur.com/qn1ynpr.png The graph above shows the distribution of returns for a stock entering and exiting a prolonged state of instabilty as per VoEx using over 35,000 occurences from the past two years throughout the entire market. It seems that a stock will almost always revert back to its last known point of stabilty.] With all that in mind, let's look at the VoEx graph for CLF: https://i.imgur.com/lqRbTSR.png I think what is most interesting about CLF is how traditionally responsive it is to VoEx - VoEx-daily spikes are almost always met with price reversions, except for lately where the price has taken off. We can see that the most recent persistent instabilty indicated by VoEx-trend is only a continuation of the previous instabilty that has been mounting since April of 2021. This is important to keep in mind as it indicates where CLF's last point of stability may be. A quick investigation showed that there are two main reasons why CLF may be persistently unstable currently: A short interest volume of 44 million shares with a median volume of only 19 million (and a constantly rising price since April), The options layouts There are two large call walls on CLF, at $25 and at $20. Remember when the persistently unstable state started? $20.63: https://i.imgur.com/IghwRYl.png It is not uncommon for a stock with a heavy dose of dealer long calls to produce these characteristic run-ups in price, followed by mean reversion back down towards the largest call-wall. As the price depreciates, the dealer long delta will offset further price decline as the price approaches the largest chunk of calls. The only threat to this is if the shorts become spooked and began attempting to cover, which would cause further price appreciation. The threat of this is slightly mitigated by the lack of the lack of liquidity noted with the past two day's price appreciation. Its common to see liquidity dry up insanely fast when shorts come into play. So combined, I think CLF is highly unstable at its current location. There is historical and data-driven precedence that the most reasonable course of action is for a reversion towards $20 over the next month or so.

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CLF's Instability

bearish

Hey guys!

CLF registered on my daily market scan for persistent instability, and I think it is ready for a reversion in price back to $20.63.

[Quick summary: VoEx measures the price-directing forces on a stock and can indicate when these forces become too heavily involved in a stock's price-action. Graphically, VoEx-daily (magenta) indicates the day-to-day changes in VoEx and VoEx-trend (tan) indicates the over-all trend. VoEx indicates the greatest level of stability when it resides within the horizontal lines, shown below. When VoEx is above the line it is said that the stock has overly-inhibitory forces, and when it is negative, it is said to be overly-propagated. Let's have a look:]

The daily market scan produced the following output:



Since the 2021-10-08, CLF has been persistently unstable with the starting price at $20.63. This is a particularly interesting start-price for CLF, as I think that is where the price is headed back to.

[Nerd note: When looking at when a stock is persistently unstable and mapping the distribution of returns from the start to the end of the instability, you get:



The graph above shows the distribution of returns for a stock entering and exiting a prolonged state of instabilty as per VoEx using over 35,000 occurences from the past two years throughout the entire market. It seems that a stock will almost always revert back to its last known point of stabilty.]

With all that in mind, let's look at the VoEx graph for CLF:



I think what is most interesting about CLF is how traditionally responsive it is to VoEx - VoEx-daily spikes are almost always met with price reversions, except for lately where the price has taken off.

We can see that the most recent persistent instabilty indicated by VoEx-trend is only a continuation of the previous instabilty that has been mounting since April of 2021. This is important to keep in mind as it indicates where CLF's last point of stability may be.

A quick investigation showed that there are two main reasons why CLF may be persistently unstable currently:

  1. A short interest volume of 44 million shares with a median volume of only 19 million (and a constantly rising price since April),
  2. The options layouts

There are two large call walls on CLF, at $25 and at $20. Remember when the persistently unstable state started? $20.63:



It is not uncommon for a stock with a heavy dose of dealer long calls to produce these characteristic run-ups in price, followed by mean reversion back down towards the largest call-wall. As the price depreciates, the dealer long delta will offset further price decline as the price approaches the largest chunk of calls.

The only threat to this is if the shorts become spooked and began attempting to cover, which would cause further price appreciation. The threat of this is slightly mitigated by the lack of the lack of liquidity noted with the past two day's price appreciation. Its common to see liquidity dry up insanely fast when shorts come into play.

So combined, I think CLF is highly unstable at its current location. There is historical and data-driven precedence that the most reasonable course of action is for a reversion towards $20 over the next month or so.

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read-time
3 min

20.50

Target Price

8/ 10

Confidence

1-2 Months

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