Iron Ore: Breather Ahead

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

Bottom Line 01/03/23

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: $80.00 / $54.40
Resistance Levels: $120.00 / $161.84 / $186.50

All prices US$/t

Technical Discussion

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 at $219.77
→ downside move off the 2021 highs has now proven to be zig-zag in nature.

Back onto the weekly chart for Iron Ore and the bounce-off support back in November has performed to expectations, with price making its way back to resistance circa $120.00 as part of this initial move. Price characteristics that were providing to us hints that a decent move north could be coming, initially included the weekly price bar from November at the lows being wide-ranging and closing out the week well off its lows.

This was then backed by the weekly bar ending on the 2nd of December. This was also wide-ranging and closed right toward its highs which was a clear-cut signal that price action was going to continue heading in a straight line toward resistance. And this is exactly what occurred with a gap higher move for the week ending the 6th of January the icing on the cake.

Yet with price-hugging resistance over the past month or so, and with the price bars narrowing right up, our analysis is now siding with some form of a breather to come into play over the coming weeks. And as part of this breather, the gap fill at $111.28 could well be a prime target for price to head to. And it will be how it responds to this gap fill that will likely dictate where we head next. Levels are now well overbought on both the weeklies and the dailies as well, so a few headwinds coming into play short to medium-term would not surprise. Red flag only below $80.00.

Trading Strategy

The recent solid bounce in Iron Ore prices hasn’t had all the likely suspects pointing north, yet the last few sessions have been pretty solid off their recent breathers. 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)) are the ones to watch when these upside moves in Iron Ore take hold. We are a little cautious again though as stated in our review with Iron prices well stretched and overbought again on this immediate cycle.

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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