Zak Mir on the Major Miners Revisited: BHP Billiton, Randgold Resources and Rio Tinto

“Once bitten twice shy” is a cliche which could be applied quite well to the FTSE 350 mining companies. Of course, as far as this asset class is concerned “50 times bitten, a hundred times shy” is probably a more appropriate analysis of what investors have seen over the past few years. The problem has been that the sector is so volatile that even within a vicious downtrend there can be significant percentage rallies. From a charting view any could be the final big move that turns this area around.

What fans of the likes of BHP Billiton and Rio Tinto will be hoping, is that with gold bouncing off its 200 day moving average (now at $1,252) we may actually have a driver that works on a technical and fundamental basis over the rest of 2015.

Starting off with BHP Billiton (BLT) it can be seen on the daily chart that January served up a bear trap rebound from below the former December support at £12.50. The narrow overshoot of just 3p before the turnaround came is a significant plus. But what may be more significant from this point is the way that last week we were treated to a close above the 50 day moving average at £14.23, the first close above the 50 day line since August.

What is also helpful is the way that going into the end of January we had support coming in off the 20 day moving average at £13.83, a feature which should act as a decent end of day close stop loss on the recovery argument. The target while the 20 day line is held is seen as being back towards former November resistance at £16 plus as soon as the end of February.

What was interesting about shares of Randgold Resources (RRS) over the course of the autumn is the way that there were so many failures towards £45 and below the 200 day moving average (currently at £46.29), that it really did not appear the bulls would get traction for a considerable period time. However, the end of December serve up an unfilled gap through the 50 day moving average followed by a rebound in the wake of this gap floor being filled.

The resulting inverted head & shoulders formation has led to a sharp rally for the shares, with a near vertical move through the 200 day moving average at the start of last month. The current position is that we are looking at a bull flag breakout above the 10 day moving average at £55.22, with the message being that while there is no sustained price action back below this feature we would be looking for further upside. The favoured destination at this point is the July price channel top at £65. This is a target which could be hit as soon as the end of February.

Looking at the daily chart of Rio Tinto (RIO) at the moment the overriding message is that we are looking at a situation which is not ideal from either the bull or the bear tack. We seem to be seeing this very patchy price action towards the floor of a falling trend channel from this time last year, with this erratic behaviour likely to the off putting to all but the most ardent of traders.

At this stage the best way forward may be to wait on a decent weekly close above post December resistance at £30. This is even though it is tempting to go with the RSI break above neutral 50 level to 52 in terms of jumping the gun on a possible rally towards the 200 day moving average at £31.20.