Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Will The Miners March On?

Published 03/17/2017, 01:52 PM
Updated 05/14/2017, 06:45 AM

On the back of Wednesday’s Fed economic policy projections indicating that only two more US rate hikes are likely in 2017, the dollar weakened and commodities rallied.

Given this back drop, the miners rallied powerfully. To put this in perspective, FTSE 100 mining stocks were up on average over 4% Thursday (vs. +0.6% for the index) and the six FTSE 100 miners were the six best-performing stocks on the day.

Having seen the mining sector surge higher throughout 2016, many investors are now asking whether Thursday’s rally is a sign of things to come -- or simply a flash in the pan.

Miners Stall In 2017

Looking at the FTSE 350 Mining (below) reveals that prices peaked at just over 17,400 in late January.

Price action in early February saw the index approach and fail to break above this level on several occasions -- a clear indication that a resistance level is in play at the low 17,300s.

FTSE 350 Mining Sector Index

More recently we have seen a sell-off ensue. Following a relatively sharp move lower last week, we saw a morning-star pattern confirm a false break of a support zone. As with any false break, this further validates the significance of this key zone/level.

Buying Opportunity?

Following Wednesday’s FOMC meeting, short-term momentum has undoubtedly swung positive for the sector. This has led some investors to suggest now is the time to buy.

However for us, a more interesting buying opportunity would present itself if the index were to break above the January swing high. In that scenario, we would have clear evidence that the sector’s stellar uptrend is back in play.

Here, I need to caveat the above by emphasizing that similar patterns are seen across individual miners, but they each have their individual nuances. For example, some are currently trading much closer to their trend highs than are others and resistance and support levels vary across the peer group as well.

Of course, if the index snaps back in the coming sessions, we would be watching closely to see if the previously mentioned support zone holds. Whether it does or not would in turn significantly impact our outlook for the sector.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.