article 3 months old

Trend Still Up For Iron Ore

Technicals | Sep 20 2017

This story features FORTESCUE LIMITED, and other companies. For more info SHARE ANALYSIS: FMG

Bottom Line 19/09/17

Daily Trend: N/A
Weekly Trend: Down
Monthly Trend: Up
Support Levels: 54.40 / 47.90 / 37.00
Resistance Levels: 95.00 / 111.00

Technical Discussion

The RBA board has stated that Global prices for Iron Ore may have now reached its peak. Here's a quote from their September policy meeting minutes:  'Iron Ore prices have been supported at higher levels because of sustained strong demand for steel in China. However, prices were expected to fall in the period ahead because of ongoing expansion of global iron ore supply following an extended period of strong investment.' Our view is that the RBA may well be correct over the short to medium term, yet longer term the jury is certainly still out. Spot prices for the benchmark 62% fines closed yesterday at US$71.37 a tonne.  

Reasons to stay neutral :
→ Chinese demand erratic yet overall looking strong
→ recent downside price action has now reversed in part
→ relentless production by the majors still in force
→ bearish channel remains in play until 95.00 can be broken above

Unless something dramatically changes shorter term then we will likely sideline our reviews in Iron Ore for a couple of months whilst the expected coiling process continues to take shape. As you know we are now labeling the price chart off the major 37.00 lows as being corrective in nature only yet this doesn't mean that higher prices cannot be attained over the coming years via an A-B-C move higher. If this interpretation of the trend is correct, then what we are are witnessing here right now is the Wave-B only of this move yet it is looking like it is going to require a number of months more before it is ready to complete. If the minor degree wave-(a) on our chart is the first stage of this consolidation phase, then the low point circa 54.40 needs to continue to hold for our medium to longer term outlook to remain on track.

Price is presently overbought so there is certainly scope for lower more immediately, although further weakness may also bring some Type-A bullish divergence to the table if price post weakness attempts to suddenly move on higher. In a nut shell and from how we are interpreting the trend, it simply looks as though more churning is going to be required for quite some time. Yet if the structures can hold together throughout the process then what we are seeing here will be deemed as energy building and therefore later on down the track the expectation will be for a breakout higher rather than lower. Until then though the chart overall looks like it is going to lack interest. 

Trading Strategy

The big 3, Fortescue ((FMG)), Rio Tinto ((RIO)) and BHP ((BHP)) are the ASX stocks we continue to monitor, and if price action continues to remain robust, then FMG is most highly leveraged to further upside moves in Iron Ore.
 

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

Risk Disclosure Statement

THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.

Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms

CHARTS

BHP FMG RIO

For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED

For more info SHARE ANALYSIS: FMG - FORTESCUE LIMITED

For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED