Iron Ore: Trend Intact

Technicals | May 02 2019

Bottom Line 01/05/19

Daily Trend: N/A
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 78.60 / 64.77 / 62.99 / 58.62
Resistance Levels: 95.00 / 111.00

Technical Discussion

Iron Ore prices are continuing to rise, supported by Chinese Steel makers. Chinese markets are closed for the rest of the week though which could limit trading activity somewhat over the next few days. Seasonal demand though is now in play, with construction activity typically picking up in China in May and June when the weather is more favorable. Firmer demand for steel and Iron has helped to offset the recent release of disappointing Chinese data, with activity levels for manufacturers and non manufacturers revealing improvement at a slower pace than expected. Certainly contradicting information is about at the moment in regards to how China is tracking economically.

Reasons to be bullish above 78.60 :
→ Chinese demand remaining overall consistent
→ relentless production by the majors still in force
→ bullish coiling process has now strongly broken out higher
→ larger equality move targets 121.00 eventually

'Since the bullish pattern breakout Iron Ore has gone from almost failing technically to the downside, to finally backing our analysis with higher levels still on the horizon. We are continuing with our longer term prognosis on the metal which remains fixated on the larger (A)-(B)-(C) equality move eventually tagging 121.00.' Our awkward looking higher degree Wave-(B) pattern did eventually play out to expectations by breaking out above 78.60. With this resisting price point now potentially converting into an area of support. The breakout move as seen on our chart was classic, and certainly solidified the move to our next area of resistance at 95.00. It needs to be noted though that this supply zone also extends up toward 111.00. So it make take time for price to chip away here, before finally getting to our equality target circa 121.00. We continue to like what we are seeing here, at least from a medium term perspective. It's been quite a slow grind though off those 37.00 2016 lows when doom and gloom for the metal reigned supreme. For now price action is making upside progress, so that's all we can really ask of it. 

Trading Strategy

BHP, RIO and FMG are the stocks we constantly recommend to check in on when Iron Ore prices start moving higher. These stocks and others on the ASX are the best way to take advantage of Iron Ore price moves. And in either direction as well. FMG has the strongest leverage to Iron Ore prices and therefore has overall been the star performer. So keep watching these stocks from a trading perspective, and continue to look for low risk entries on the long side whilst our longer term bullish rhetoric remains in play.

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).

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