Technicals | Dec 08 2022
This story features BHP GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BHP
Bottom Line 6/12/22
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Down
Support Levels: $80.00 / $54.40
Resistance Levels: $120.00 / $161.84 / $186.50
Reasons to remain neutral:
→ Chinese demand has weakened for now yet may only be temporary
→ relentless production by the majors is still in force
→ larger higher degree multi-year [A]-[B]-[C] move north high point could be significant
→ downside move off the 2021 highs has now proven to be zig-zag in nature.
It’s been a couple of months since we last reviewed the Iron Ore chart and admittedly since then, it has headed a little lower than the expectations we outlined in that review. To the extent that our proposed positioning of the trend which was a longer-term larger cycle double zig-zag move to the upside has been taken off the table. It doesn’t mean new all-time highs are not going to be achieved again bigger picture, yet the depth of this dip off the July 2021 highs is deep enough now to make it a very difficult task.
So the pullback has now taken on the form of an (A)-(B)-(C) zig-zag move that looks to have completed right on $80.00 support. The depth as mentioned is what is concerning though as it has now retraced 78.6% of the bullish run-up off the December 2015 lows. Too deep for me to get excited about yet that said still acceptable within the theory. Personally having applied wave counts to thousands of charts though, any corrective phase that dips more than the 50.0% – 61.8% retracement zone, generally ends up struggling within the recovery process.
The good news though is that the bounce has been strong off support with the follow-through, especially last week, very solid. That particular weekly price bar tagged an intraday low of $92.90 yet closed out the week right on the highs at $107.44. The move overall off the lows has been impulsive as well which is exactly what we like to see from the angle of a possible trend reversal taking shape from here. Yet we still require price action to prove even further via higher prices before we can get confident. The next line of resistance is around the $120.00 mark so our confidence will certainly strengthen if we can witness a weekly price bar close above this important line in the sand.
The recent solid bounce in Iron Ore prices has all the likely suspects pointing north. BHP Group ((BHP)), Fortescue Metals ((FMG)), and Rio Tinto ((RIO)) combined with some of the small to mid-caps like Mt Gibson Iron ((MGX)) and Champion Iron ((CIA)). All of them have responded nicely to last week’s big bounce so they are worth keeping an eye on for any low-risk trading set ups moving forward from here.
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