Cleveland-Cliffs Plummets 10.9% Amid Sector Turbulence and Analyst Downgrades: What’s Fueling the Selloff?

Summary
• Cleveland-Cliffs (CLF) plunges 10.95% intraday to $11.781, its lowest since 2023
• KeyBanc downgrades CLF to Sector Weight, citing overvaluation and margin pressures
• Steel sector volatility intensifies as Nucor (NUE) also declines 2.45%

Cleveland-Cliffs is under siege as a 10.9% intraday selloff shakes investor confidence. The stock’s collapse follows a string of analyst downgrades, deteriorating gross margins, and a broader steel sector slump. With CLF trading near its 52-week low of $5.63, the question looms: Is this a buying opportunity or a warning sign for a leveraged steel giant?

Analyst Downgrades and Debt Concerns Trigger Sharp Selloff
The selloff in CLF is a direct consequence of KeyBanc’s downgrade from Overweight to Sector Weight, coupled with a $13 price target cut. Analyst Philip Gibbs highlighted ‘modestly downward estimate revisions’ for 2025-2026 and a -4.94% gross profit margin as red flags. Meanwhile, S&P’s downgrade to ‘B+’ due to $8.06B in debt and weak demand has amplified fears. The stock’s 56.3% six-month rally has created a valuation mismatch, with EV/EBITDA at 11x and a current ratio of 2.04 failing to offset liabilities. As CLF’s strategic partnership with POSCO remains unmaterialized, investors are fleeing amid deteriorating fundamentals.

Steel Sector Volatility Amplifies CLF’s Decline
The steel sector is in turmoil, with Nucor (NUE) down 2.45% and U.S. Steel (X) under pressure. CLF’s 10.9% drop mirrors broader industry pain, driven by weak auto demand, rising input costs, and trade policy uncertainty. While CLF’s debt-to-EBITDA ratio of 1.41 outperforms peers like BlueScope (BSP), its -4.94% gross margin lags. The sector’s 1.91 beta underscores its sensitivity to macroeconomic shifts, with CLF’s leveraged position making it a bellwether for steel’s near-term health.

Options and ETF Strategies for Navigating CLF’s Volatility
• RSI: 59.77 (neutral), MACD: 0.28 (bearish crossover), Bollinger Bands: 14.11 (upper), 13.19 (middle), 12.27 (lower)
• 200D MA: $10.23 (below current price), 30D MA: $12.96 (resistance)

CLF’s technicals signal a short-term bearish trend amid oversold RSI and a breakdown below key moving averages. The stock is testing its 200D support at $10.38, with a 59.77 RSI suggesting potential for a rebound. For options traders, two contracts stand out:

• CLF20260116P11: Put option with 76.43% implied volatility, 75.50% leverage ratio, and 0.1876 gamma. This contract offers high leverage for a 5% downside scenario (projected price: $11.22), yielding a $0.78 payoff. Its high gamma ensures sensitivity to price swings, ideal for a volatile short-term trade.
• CLF20260116P12: Put option with 72.49% implied volatility, 22.79% leverage ratio, and 0.2731 gamma. With a projected payoff of $0.78 under a 5% drop, this option balances liquidity (94,292 turnover) and directional bias. Its moderate delta (-0.45) allows for controlled exposure.

Action Alert: Aggressive bears should prioritize CLF20260116P11 for a 5% downside bet, while CLF20260116P12 offers a safer, liquidity-backed alternative. Both contracts capitalize on CLF’s near-term volatility and deteriorating fundamentals.

Backtest Cleveland-Cliffs Stock Performance
The backtest of CLF's performance after a -11% intraday plunge from 2022 to the present reveals a mixed short-term outlook, with varying win rates and returns over different time frames:These results suggest that while CLF has a higher win rate and positive returns over longer periods, such as 10 days and 30 days, the immediate aftermath of the intraday plunge shows volatility, with a 3-day win rate below 50% and a slight negative return. Investors may need to consider their risk tolerance and investment horizon when assessing the potential impact of such events.

Act Now: CLF’s Bearish Momentum Demands Strategic Positioning
CLF’s 10.9% selloff reflects a perfect storm of analyst skepticism, debt pressures, and sector-wide weakness. While the stock’s 52-week low of $5.63 remains a distant floor, the immediate focus is on the $10.38 support level. Nucor’s 2.45% decline underscores the sector’s fragility, making CLF’s strategic partnerships and debt restructuring critical watchpoints. For traders, the path forward hinges on a breakdown below $10.38 or a rebound above $12.37 (30D MA). Takeaway: Short-term bears should target CLF20260116P11 for a 5% downside play, while long-term investors may wait for a clearer catalyst.