Iron Ore: Uptrend

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

Bottom Line 19/09/23

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: $103.55 / $80.00 / $54.40
Resistance Levels: $130.00 / $161.84 / $186.50

[All prices US$/t]

Technical Discussion

Reasons to remain neutral:
→ Chinese demand is always being monitored
→ strong production by the majors is still in force
→ larger higher degree multi-year [A]-[B]-[C] move high could be significant at $219.77 in July 2021
→ downside move off the 2021 highs has now proven to be zig-zag in nature with a bounce potentially now in play.

Prices for Iron Ore cargoes with a 62% Iron Ore content have risen to $122.00 in the second half of September and this is the highest price has been since early April amid expectations of higher demand coming out of China. Anticipating potential regulations from Beijing on steel production, mills accelerated their production in the short term to preempt any impending restrictions, leading to a surge in demand for iron ore inputs.

Also, JP Morgan raised target prices for the iron ore sector as Chinese steel demand remains resilient as infrastructure activity makes up for recent struggles from residential property constructors. Although the residential construction sector recently got a small boost from government measures to stimulate housing demand.

We last reviewed our Iron chart in July, and back then we were seeing the possibility for price action to embark on a move north as part of a corrective A-B-C zig-zag type pattern. And to this point in time this appears to be how things are playing out.

Generally, these corrective style of moves target wave equality, so if things are to continue to follow our script over the coming weeks, then the immediate Wave-C that appears to be in play will be looking to push further north up toward $155.00 over the short to medium term.

Such a move will see price break above resistance circa $130.00 which will be a positive be it there is clearly supply hanging around between $150.00-$160.00.

So this zone for now will be a pressure point where price will likely inflect from initially and take another breather. It’s also a price zone where the previous higher degree Wave-(B) high rejected from at $161.84 back in April 2022.

So it is unlikely this area of resistance will be conquered on first attempt as part of this immediate run north. Another market that we are happy to just take one step at a time for now.

Trading Strategy

As this contract cannot be traded, the best way to be involved in the sector is via the numerous iron-related stocks on the ASX. The main ones are 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)).

These stocks tend to be the ones to watch as they do have a correlation with our Iron Ore Chart. Yet there are others as well that will come up on Pete’s radar when the timing is right within his ASX Chart reviews, so keep a lookout for these.

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