Iron Ore: Robust Upside

Technicals | Jun 05 2019

Bottom Line 04/06/19

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

Seasonal demand is now in play, with construction activity typically picking up in China in May and June when the weather is more favorable. Yet the U.S China trade war is continuing to be concerning. As against other commodities though that have been hard hit as these trade concerns continue to play out unresolved, Iron Ore is trading more robustly traditional fundamentals. And by this we mean that constrained supply in 2019 has simply lead to higher prices being achieved. The tailing dam disaster in January at one of top exporter Vales mines in Brazil has contributed to this. Along with a tropical cyclone that closed mines and ports in the northwest of Australia. Australia's issues will resolve pretty quickly yet exports from Brazil are likely to remain low for some time. So the traditional effects and significance of supply and demand are clearly at play here when it comes to fluctuations in Iron Ore prices.  

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.' This has been our longer term rhetoric, and price action for now is continuing to prove. For price to achieve 121.00 though, it still has to get past psychological 100.00 of which it is presently posturing around. And then the more stronger horizontal line of resistance circa 111.00. So to attain target it is going to take time, along with back filling and some normal ebbing and flowing that is characteristic of healthy markets. Things only start to deteriorate below 78.60 which is the original breakout zone of the coiling triangle pattern which took place back in February this year. Price is well over bought on the weeklies right here and now, and Iron Ore doesn't generally sustain in these situations historically. So a healthy dip of sorts may well be just around the corner. Bigger picture though price action to the upside continues to remain very robust and well and truly on the bid.

Trading Strategy

BHP, RIO and FMG are the stocks we have constantly recommended subscribers to look at in regards to trading opportunities. And all throughout 2019 they have simply been going gang buster and correlating nicely to the Iron chart. So if you are running with trades in these majors then well done and continue to manage accordingly. Longer term and as per our technicals, we continue to see scope for higher. Yet there is likely to be breathers along the way, and right at this juncture we look to be getting close to needing one. Continue to manage your trades vigilantly yet always remember to respect your stops.  

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.

FNArena is proud about its track record and past achievements: Ten Years On

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms