Zak Mir on Miners’ Misery: Antofagasta, Fresnillo and Glencore
In the run up to the September 18th Scottish referendum I am reminded of the saying associated with Robert The Bruce, “if at first you don’t succeed, try, try, again.” Given that the maxim is now nearly 700 years old, it can be said that knowing how to play the waiting game is certainly illustrated in terms of our friends north of the border. I fully expect the country of my birth to leave the United Kingdom either in September, or if not, within a few years.
Ironically, for those playing the waiting game on the mining sector getting back to its turn of the decade peaks, a painful wait has been delivered.
Antofagasta (ANTO)
The wait has been punctuated by some very convincing false dawn rallies. The last one was at the start of 2014, and can be seen clearly on the daily chart of Antofagasta (ANTO), running from 750p in December to 950p plus in February. The position now at the copper miner is that we are looking at what is shaping up to be at least a re-run of the rally a few months back.
If anything, the setup on this occasion is a little stronger than that which preceded the previous bull run. This is said on the basis of the gap up fill and near vertical spike towards the 200 day moving average, which is currently at 824p. The end of week close on July 4th above the 200 day line is clearly an added plus.
The hope now is that at least while there is no end of day close back below the May resistance at 812p we should see a reasonably direct journey towards the main 950p resistance zone in what is shaping up to be a decent risk / reward trade despite the gains already achieved.
Fresnillo (FRES)
At Mexico focused silver miner Fresnillo (FRES) we can see a useful looking clearance of the former May resistance at 868p, although a slight stall below the April 934p peak. Nevertheless, this slight disappointment is more than offset by the way that last week witnessed an as yet unfilled gap to the upside through the still falling 200 day moving average at 861p.
The likelihood now is that even if there is a pullback to test the 200 day line – there normally is – enough positive momentum is behind Fresnillo to suggest that one should be buying the dip. At this stage only an end of day close back below the 200 day line would even begin to suggest that we are looking at a false dawn, or at least a false start for the bulls to start the summer.
The big reward though is arguably the way it is possible to drawn a rising trend channel on the daily chart with the resistance line projection from the start of the year pointing as high as 1,120p. The timeframe on such a move is seen as being as soon as the next 1-2 months – once the current overbought 70 plus RSI unwinds itself.
Glencore (GLEN)
Perhaps the highlight as far as the daily chart of Glencore (GLEN) has been concerned in recent months is the way that since March we have witnessed an extended crawl / base at and just below the rising 200 day moving average at 325p. The as yet unfilled gap to the upside over the past week above the 200 day line is an obvious show of strength, and should be the starting gun on a significant new rally.
The favoured destination at this point is the top of the December rising trend channel, as high as 370p by the end of July. It helps that we have the former May intraday peak of 335p as a relatively tight stop loss. This guards against the latest overbought RSI leading to a near term stock price peak before the expected target.
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