by Chris Becker
A decent swing in iron ore miners is underway, following the modest gains on the iron ore spot market, but as I cautioned earlier the relationship between the spot price and miners is not linear, long or short. So don’t be confused if small moves in spot send stocks soaring!
Fortescue (FMG) finished up nearly 5% higher yesterday, gapping up on the open and rallying all day. The next area of resistance is $4.40 (the closing lows before its recent breakdown) with a move above $4.50 indicating much more than a swing long/dead cat bounce.
After rallying nearly 8% on Wednesday, Atlas Iron (AGO) was flat yesterday and is still under technical pressure on the daily charts. Perhaps news of the something something closure has paused this move, I’m not sure, but upside momentum has stalled here for now. AGO rallied almost 100% in the last quarter of 2013 on a recovery in spot iron ore:
Next, the majors – BHP-Billiton and Rio Tinto. The former rallied nearly 1% in London trade overnight, but the latter was flat.
Both contributed to the huge rally in the ASX200 yesterday, particularly BHP up nearly 4% in a large reversal, which it should continue today (if a little less modest) due to the shock rise in gold prices overnight:
Resistance at $37 per share beckons and then $38.50 for a confirmed rally.
I’m not too sure about RIO though – this price action still looks weak to me internally – but I caution my success rate with RIO is quite low!
RIO really needs to get its head above $60 per share, which would take out its previous short term high and crack above its downtrend line for any further bullish interest in the stock.
Manage your risk here as always.