Iron ore: Price and Miners in oversold territory
Iron ore prices, while having reached decade highs in 2020, have been consolidating in 2021.
Iron Ore prices, while having reached decade highs in 2020, have been consolidating in 2021. However, a still elevated iron ore price remains earnings accretive for major miners of the steel making ingredient some of which are looking oversold in the short term. Even for diversified miners, iron ore is often the most significant of the commodities to the earnings of these companies which include Rio Tinto, BHP Group, Fortesque and Vale. In the article below we look at the iron ore price and the top four miners of the commodity assessing possible short-term trading opportunities therein.
Iron ore price
The above graph highlights the broad range within which iron ore has been trading throughout 2021. The price looks to be reversing off the 960 support level and out of oversold territory. 1057 becomes the initial resistance target from the move. Should the price instead move to close below the 910 support level, the price reversal and range trade assumptions would be deemed to have failed. A move below 910 would also suggest that the longer term uptrend is instead breaking down.
Rio Tinto
Rio Tinto PLC currently finds its share price trading at what appears to be a key level of historical support (5420). Traders looking for long entry might hope to see a strong price reversal at this level, supported by a sharp move out of oversold territory. Should this support level hold and the price reversal scenario manifest, 6105 becomes the initial upside target from the move. A firm close below the 5420 level would however instead target further decline towards the 5085 level.
Vale
The RIO-P-US price currently trades mid-range, while the oscillator remains in neutral territory as well. Traders of the company might prefer to look for long entry on a price reversal closer towards the 16.00 support level.
The BHP Group (LSE, ASX & JSE listings)
The BHP Group PLC (LSE) currently trades around gap support at 2075, while the stochastic oscillator shows the price to be oversold at current levels. Traders looking for long entry might prefer to see a stronger price reversal from either current levels or closer towards the 2000 level. Along with the price reversal we would like to see added confirmation with a sharp move out of oversold territory.
In this scenario (should it occur), a close below the reversal low might be used as a stop loss consideration for the trade, while 2270 becomes the initial upside resistance target from the move.
The BHP Group (ASX) while oversold, is still in decline (short term) with 44.80 and 43.60 the next downside support targets considered. It is around these levels that range traders might hope to see a bullish price reversal before targeting a move back towards resistance at 47.45.
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The BHP Group PLC (SA) similarly to its ASX listed counterpart, remains oversold, although it is still in a short term decline (short term) with 41280 the next downside support target considered. It is around this level that range traders might hope to see a bullish price reversal before targeting a move back towards resistance at 46590.
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Fortesque
The share price of Fortescue Metals Group Ltd now trades below gap support at 2105, bringing the 18.70 to 19.20 levels as the next downside support targets. Traders looking for long positions might prefer to see the share price back above 21.05, with a move out of oversold territory to support the suggestion of renewed gains and targeting a move towards the 23.20 to 24.20 resistance range.
In summary
- Iron ore prices are now trading around support of a broad range since reaching decade highs last year
- The BHP Group (Multiple listings), Rio Tinto & Fortesque all currently trade in oversold territory
- Vale currently trades mid-range
- Traders might look for bullish price reversals near support for long entry, while using a close below the reversal lows (should they occur) as stop loss considerations
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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