The Return of the Mining Stocks? Anglo American, BHP Billiton, Fresnillo

One of the peculiar joys of youth – let us say being under 25 – is that you question and/or reject almost everything you are told. This is especially the case if the source is an old person, e.g. over 40. What is interesting is that those who follow the financial markets and wish to be ahead of the crowd seem to need to be similarly cynical in terms of what they should believe.

For instance, from my perspective there was and is no way the Federal Reserve can risk a crash by raising interest rates aggressively – a point which is underlined by the way that it always blinks at the slightest retracement for leading U.S. indices. This idea has been in force well before the summer of last year when the Dollar started to surge, but still FX traders kept on buying. It is only now they realised that the Dove Janet Yellen really is a Dove on rates.

A similar independence of mind has been required on mining stocks where we have been told for years that they are too cheap, and yet every year they become cheaper still. Now that most may have given up on this asset class, the question now is whether or not it is finally safe to come out of the closet? On this note it seems fair to take another look at the technical position of leading UK mining stocks.

I start off with Anglo American (AAL), a stock which has been battered since the summer. Interestingly enough, the start of the rout came via a near perfect unfilled gap to the downside through the 200 day moving average, then near 1,500p. What is appealing currently is the way that there has been a higher low for March put in versus January above 1,000p, with Monday’s hammer candle also very encouraging. All of this would go to suggest that at least while there is no end of day close back below the initial 1,041p March low the upside here could be towards the area of the 200 day moving average at 1,341p – also the November resistance zone. The timeframe on such a move is seen as being the next 4-6 weeks.

BHP Billiton (BLT) is in positive focus currently from a charting perspective on the basis that it is possible to draw a near perfect rising trend channel from October to fit the price action since then. All of this would go to suggest that at least an intermediate rally is on its way, especially after the March bear trap gap reversal from below the February 1,452p floor. This should allow the shares to accelerate to the upside, with the target seen as being as high as the October resistance line projection now pointing as high as 1,820p. This upside could be hit as soon as the end of April.

Finally, we visit the present daily chart position at Fresnillo (FRES), the Mexico focused silver producer. What will be key here over the next couple of weeks is whether the shares will be able to sustain the former November 675p intraday floor. The expectation is that at least while there is no end of day close back below the old autumn low, the upside should be towards the top of the March gap to the downside at 788p. But only a weekly close back above this feature would really suggest that the bulls are back on track in a sustainable way. Nevertheless, even filling the gap would be a decent trade from current levels.