Technicals | Jan 25 2017
Bottom Line 24/01/17
Weekly Trend: Up
Monthly Trend: Neutral
Support Levels: 70.50 / 54.40 / 47.90
Resistance Levels: 86.70 / 89.00 / 98.00
Technical Discussion
Well what is 2017 going to have in store for us in regard to Iron Ore prices? Market analysts are continuing to try and jaw bone the base metal lower, yet price is continuing to simply hold its ground, and the immediate uptrend for that matter. Interesting to note is yesterdays announcement that Western Australia is about to get a new $5.6 billion Iron ore project in the Pilbara involving the billionaire Todd family from New Zealand. It will mean over 3000 new jobs being created and a new railway link built into the central Pilbara region. This comes on the back of RIO Tinto announcing it would cut 500 jobs from its Iron Ore operations basis their view that prices are going to significantly struggle from this year on as a minimum. Certainly very interesting developments unfolding in this market space in 2017 and beyond.
Reasons to stay neutral (bullish above 86.70) :
→ Chinese demand potentially now on the improve
→ recent price action positive yet bears still being monitored below 86.70
→ relentless production by the majors still in force yet being absorbed
Price action is at a clear cut inflection point. In its present form it is hesitating right at equality around the 80.00 price zone, and until it can start pushing beyond here, then the move off the significant 37.00 lows from back in late 2015 can only be defined as corrective in nature. We need equity surpassed and by a reasonable margin before we start turning bullish. The key number we keep talking about is 86.70 which is where overhead resistance resides, yet there is also another significant number that will confirm that the bulls are back in control, and that comes in at psychological 100.00.
This is where price finally breaks out from the longer term bearish lowering channel that has kept it in a downward trajectory for the past 6 years. So any move above 100.00 will certainly be a bullish statement. Levels are well overbought on the weeklies right here, yet bullish markets can sustain themselves for long periods of time whilst in this position. The big question is whether Iron Ore is now a bullish proposition or not. Technically, the jury is still out, be it our bias remains to the upside!
Trading Strategy
Using this chart, we will continue to track ASX Iron Ore related stocks that we all like to trade such as FMG, RIO and BHP. FMG has been the absolute star performer over the past 12 month having risen around 350%. Not bad work if you can get it! The stock is up another 5% just within today's trading with the trend well and truly running to the upside. During the same period BHP is up around 80% with RIO also putting in a similar performance. As mentioned in our review, Iron Ore is now at an important potential inflection point, with 86.70 being kept a very close eye on over the coming months as it will dictate whether this trend is going to continue to solidify to the upside, or take a prolonged breather. The former is what we are looking for, which will keep ASX Iron Ore related stocks well and truly on the bid.
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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