Iron Ore: Remain Bullish

This story features BHP GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BHP

Bottom Line 11/5/21

Daily Trend: N/A
Weekly Trend: Up
Monthly Trend: Up
Support Levels: $148.42 / $116.47  / $98.01
Resistance Levels: N/ (all-time highs)

Technical Discussion

Reasons to remain bullish longer-term:
→ Chinese demand remains strong
→ relentless production by the majors still in force yet fulfilling the demand
→ larger multi-year [A]-[B]-[C] move north remains in play
→ price robust throughout the 2020 global market turmoil care of the Covid-19

We haven’t reviewed Iron Ore since back in February. At that time we were watching the higher degree Wave-(4) developing. With our outlook being that when the Wave-(4) completed, price action would be ready to make a charge at the all-time high zone circa $191.90 as part of a Wave-(5). And as you can see on our weekly chart, this has now been achieved.

From an Elliott Wave perspective, it now appears as though the higher degree Wave-(5) of [C] is subdividing as a 5-wave pattern within itself. With the recent highs locked in at $215.48 representing the intermediate Wave-3 of (5), and by all accounts potentially getting close to completion.

The typical Wave-3 1.618 x W1 extension measures in at $206.38 USD. So with this target now having been exceeded, we need to be on the lookout for a Wave-4 breather to start taking shape sooner rather than later. A healthy breather is needed as well to keep our longer-term bullish argument on track. As the higher degree Wave-(3) was also longer than the Wave-(1), it does allow scope for the higher degree Wave-(5) to be the longest wave in the sequence. Which based on what we have seen unfold to this point, a Wave-(5) extension does look to be high probability over the coming months. A core ruling in Elliott Wave states that Wave-(3)’s cannot be the shortest wave. So the threat of this rule being broken is off the table. The bulls continue to be well and truly in control here.

Trading Strategy

Our Iron Ore bellwethers, BHP Group ((BHP)), Rio Tinto ((RIO)), and Fortescue Metals Group ((FMG)), have been clearly on the bid. With these stocks naturally strongly correlated to Iron Ore price action. Yet we do need to be aware that they will be affected as well if Iron Ore prices decide to go into multi-week breather mode, as proposed in our review tonight. Longer-term though, if the Wave-[5] does subdivide into a 5-wave pattern, even higher levels remain on the horizon looking well ahead. This means keeping Iron Ore aligned ASX stocks on your watchlists from a trading perspective.

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).

This report may contain advice that has been prepared by The Chartist Pty Ltd (ABN 40 641 323 051). The Chartist Pty Ltd is a Corporate Authorised Representative (CAR No. 1282007) of Shartru Wealth Management Pty Ltd ABN 46 158 536 871, AFSL 422409. Any advice is considered general advice and has been prepared without taking into account your objectives, financial situation or needs. Because of that, before acting on this advice you should therefore consider the appropriateness of the advice having regard to your situation and your own objectives, financial situation and needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. If the advice relates to the acquisition, or possible acquisition, of a product (other than a security e.g. a CFD) then the client should obtain the relevant Product Disclosure Document and consider it before making any decision about whether to acquire the product. Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.

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