Iron Ore: Keep Watch

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

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
→ 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.

Trading Strategy

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.

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.

Risk Disclosure Statement

THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITIES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.

Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms