A Positive Reversal For BHP Group Shares

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Last Thursday's AI-related break down saw sellers capitulating followed by a sharp positive retracement in BHP Group shares. Fairmont Equities' Michael Gable spots a  "false break" and a reason to buy.

By Michael Gable

US CPI numbers coming in last week worse than expected was a catalyst for bond yields to fall.

That’s right, yields did the opposite of what you would expect.

A rise in CPI should see bonds sell-off but they rallied instead. That is a classic sign that bonds had fallen enough and the best risk/reward from there was not to push bonds even lower (which sends yields higher as they work in opposite directions), but to buy up bonds.

As a result, yields have fallen and we have therefore seen a possible topping out in the US dollar.

As we have noted previously, the rise in yields and the US dollar looked unsustainable in the short-term, so it was just a matter of time until we saw some sort of mean reversion.

Now the bond market has switched from worrying about inflation to worrying about growth.

And with US interest costs now at US$1 trillion, we can see that bond yields can only get so high before they either need to come down naturally or with some sort of intervention.

Again, all of this is negative for the US dollar and that will be a tailwind once more for commodities.

Today, we offer a technical view on BHP Group ((BHP))

We looked at BHP Group last week and noted that it looked well supported and represented a buying opportunity.

However, last Thursday it gapped under the September low on high volume and this could have been a negative sign.

Despite that poor price action, BHP gapped back up last Friday to leave Thursday’s price action now looking like a “false break”.

That is, BHP appeared to break lower on Thursday but a quick reversal has negated that.

This means that Thursday contained a lot of panic selling and capitulation.

So, with a lot of the sellers now out of BHP, we should see a sharp move higher from here.

The false break from Thursday now makes BHP look more bullish than it did a week ago because we can see that more sellers have exited the stock and it gives BHP a clearer path to climb higher.

BHP is therefore a buy at current levels.

Content included in this article is not by association the view of FNArena (see our disclaimer).

Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)

Fairmont Equities is a share advisory firm assisting Private Clients with the professional management of their share portfolio. We are based in the Sydney CBD but provide services to private clients across Australia. We believe that the concepts of fundamental analysis and technical analysis of stocks are not mutually exclusive. Regardless of whether you are a trader or long term investor, combining both methods is crucial to success. As a result, the unique analysis of Fairmont Equities is featured regularly in the media such as Sky News Business, CNBC, The Australian Financial Review, and the ASX newsletter. Contact us for a free trial of our research and information on our portfolio management services.

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Fairmont Equities Australia (ACN 615 592 802) is a holder of an Australian Financial Services License (No. 494022). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.

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