Opportunity To Buy Rio

This story features RIO TINTO LIMITED, and other companies. For more info SHARE ANALYSIS: RIO

By Michael Gable 

Markets haven’t had the best start to the year and last week’s disappointing jobs numbers from the US are keeping us on the downwards trajectory for now. With the ASX200 not looking like it wants to stay at 5300, we now target much stronger support around 5200 instead. From there we should see a swift move back up towards 5400. In the meantime, we just have to wait and see. Apart from iron ore stocks, the recent pullback hasn’t been very sharp so this is most likely a consolidation under the previous high instead of a major trend reversal. Speaking of iron ore stocks, we take a look at Rio Tinto ((RIO)) in today’s report. We’ve also had a more in-depth look at a couple of popular companies out there in Magellan Financial Group ((MFG)), and Fletcher Building ((FBU)).
 

Rio Tinto

 

Iron ore miners have taken a hit recently but there appears to be some support around current levels for RIO. It should bounce from around here but it will be important to see what sort of bounce we get in the share price. If the bounce is feeble and struggles to get past $66, then we may see RIO dip once again towards $60. After rallying quite nicely over the last several months (in the order of nearly 40% from low to high), it wouldn’t be that unusual to see the shares take a breather. A feeble rally will give traders an opportunity to sell, or longer term investors the ability to write some covered calls to hedge the downside. RIO at $60 is approximately the 50% retracement of the June – January rally, so we should expect that to provide strong support. If we see RIO in an oversold state at that point, then investors can buy back in with confidence. From there we would expect to see RIO rally back up towards $69.
 

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Michael Gable is managing Director of  Fairmont Equities (www.fairmontequities.com)

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.

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