Where’s The Bottom For BHP?

This story features FORTESCUE LIMITED, and other companies. For more info SHARE ANALYSIS: FMG

By Michael Gable 

We mentioned last week that there could be an opportunity in taking a short position on the AUD/USD. An easy way to do this is buying a US dollar ETF. The Aussie has stayed strong during the last week but yesterday moved lower on a weak building approvals number. We also have the RBA interest rate decision today so that will add to a bit of currency volatility.

With overall market volatility extremely low, the only other sector that has shown a bit of life that we have been trading has been in the iron ore sector. Iron ore prices were down over 4% last Friday and that set the scene for another drop in share prices. However, Chinese PMI for May came in at 50.8, which was above the 50.7 expected, and well above April’s reading of 50.4. It was a good result and the market is torn at the moment between being negative on these stocks or being positive. While Fortescue Metals ((FMG)) looks well oversold here, BHP Billiton ((BHP)) is under pressure. We have a write up today on what the BHP chart looks like.
 

BHP Billiton

BHP is clearly having trouble getting through the $38 – $38.50 region. Since we called a top back on 25 February, it has been a case of selling calls (or stock) up near $38 and buying back at lower levels. BHP may try to mirror image what it did before the top in February. That is, we could start seeing it trade down towards $35.50 again. It appears to be forming a complicated head and shoulders, so that $35.50 region could represent a neckline. A breach of that neckline could see BHP test $31 again. It is too early to call for such low levels, but it is worth keeping an eye on.
 

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)

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.

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

Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). 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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