Iron Ore: Consolidation Supportive

Technicals | Oct 03 2019

Bottom Line 02/10/19

Daily Trend: N/A
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 78.60 / 75.58 / 64.77
Resistance Levels: 111.00 /  123.19 / 142.80 / 155.00

Technical Discussion

'Post our target attainment though on our chart, price is now clearly in breather mode again, and sitting around a pretty important potential pivot point.' This from our last review, and it certainly was a clear cut pivot point with price action responding since via a solid downside move. Clearly indicating that some form of top has locked in at 123.19. Recent reporting out of Australia has also stated that global industrial production outlooks appear to be weakening. So they have recently been cut in relation to global steel demand. U.S / China trade relations also remain a concern combined with a possible global downturn and prospects of recessions hitting a number of economies. All are potential fundamental issues for Iron Ore that continue to be raised. This outlook tends to back the technical picture that we have highlighted on our price chart tonight as well. Lets take a closer look.

Reasons for a sustained breather to now dominate medium term:
? Chinese demand remaining overall consistent yet potentially weakening
? relentless production by the majors still in force
? larger equality move target circa 121.00 attained with price inflecting strongly 

 From a technical perspective, price action has pretty much been following the script to this point in time off the 2016 lows. Remembering as well that we are looking at the weekly chart here. The larger (A)-(B)-(C) move north was pretty much text book with equality being tagged just above 120.00. So pretty much to the tick on target. With the major inflection during the week of 2nd August categorically signalling that a medium term high (as a minimum) has now locked into place. We still see scope for higher longer term via an even larger [A]-[B]-[C] move north, with the recent high locking in the first stage of this move via a Wave-[A].

Yet it is really going to be dictated by how price performs from here. As stated in our video tonight, the 50.0% retracement at 80.00 is likely going to be the key. If price action from here can remain above this point, then a medium term larger sideways consolidation phase lasting multiple months may now be unfolding to eventually lock in the higher degree Wave-[B]. So a process similar to the lower degree Wave-(B) as seen on our chart, that lasted a solid 18 months. The gap at 106.51 we are also expecting to get filled as part of this process. So it's going to be a slow sideways grind for a while at best if our analysis continues to prove from here. 

Trading Strategy

From a trading perspective, the ASX big guns in BHP, RIO and FMG are always worth keeping an eye on as they tend to trade very much in line with the Iron Chart's performance. Prices on all three have shown weakness with the recent dip, yet overall the bigger picture trends in these stocks remain strong. If our analysis is correct, then what we would be expecting from here for Iron Ore related stocks would be for some serious medium term consolidation to take place. Yet potentially productive moving forward if our Iron Ore chart continues to remain robust above the aforementioned 80.00 price point. Certainly not negative on the sector right at this juncture. Yet keeping a close eye on it.

[Note: Iron ore prices will be relatively steady this week due to the Chinese holiday – Ed]

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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