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Flash Note: Resource Shares

by / / Featured, Trade Ideas

Not too long ago concern over the Chinese economy, global growth and low commodity prices, lead to fears that resource companies could go under. Compounding this was the fact that these companies were over-indebted, having taking on huge projects at the peak of commodity cycle.

Assisted by a weaker US Dollar, a global economy that is in better shape, the abating of fears over the Chinese “hard landing” and a reduction in oversupply, mining companies are now in much better financial condition than in prior years. This is reflected in the share prices that have risen from multi-year lows.

What is current outlook for the share prices you may want to know? Below we have a few chart views from the Trading Desk, highlighting potential opportunities:

Anglo American plc (AGL)

AGL is currently trading near it’s 50-day moving average, having pulled back from the R295 level just under three weeks ago. The RSI is also trading near support, looking to turn up from current levels. The first upside target according to Retail Client Trader, Innocent Maponde is R285.

Glencore (GLN)

Glencore is the preferred pick of KZN Regional Director, Taahir Joosub.

To summarize his investment thesis:

– Confidence in management (Ivan Glasenberg), a visionary in the commodity space.
– Global economic recovery underway, underpinning demand for metals
– Composition of metals. Glencore is the well positioned more than any other miner to capitalize on growing demand for electric vehicles.
– Recently ramped up production in metals such as cobalt, nickel and copper. Key metals essential for battery manufacturing.
– Geographically diverse exposure, not heavily concentrated in S.A and associated uncertainty around Mining Charter outcomes.

Technically:

– Uptrend intact from early 2016
– Found support at 200-day moving average
– RSI in oversold terrirory
– Horizontal support around R60 with a potential double bottom in the making.

First target R71
Second target R76

BHP Billiton (BIL)

BIL has retreated from the recent peak of R283.27 we saw of 15-Jan-2018. Over the last three trading sessions we have seen the price hover around support at R248/250 before starting to move higher during midday (13-Feb-2018). The price is above the 200-day moving average and the RSI has turned up from oversold territory. The first target to the upside is R263, with potential to test R270.

Kumba Iron Ore (KIO)

Over the last month the share has traded in a downward channel from the peak at R415 down to the recent low of R318. This morning the share (on the back of results released), broke out of the channel, hitting a high of R365.95 before running into resistance at the 50-day moving average. The pullback may see the share trade back at it’s prior short term resistance at R339/341 giving an opportunity for traders to accumulate on a re-test of the breakout level.

According to Michael Porter, Private Client Trader, preferred exposure to KIO would be through AGL which owns approximately 70% of the outstanding shares.

At current prices, KIO offers a 8.6%.

Any further short term trading opportunities in these shares will be communicated via the Unum Chat group, so make sure you are registered.

If you are interested in trading any of these ideas, please drop the trading desk an e-mail today to get going.

Here’s to profitable trading.

Lester Davids

Lester Davids

Trading Desk Analyst at Unum Capital
Lester started his career as an intern in the Group Schemes Risk Management department of Old Mutual in 2006 after having attained his National Diploma in Internal Auditing from the Cape Peninsula University of Technology. After a year and four months of service he took up the opportunity offered by Deloitte's Risk Advisory Services for a three-year contract as a Trainee Internal Auditor.

Whilst searching for employment after his had contract expired, he made the decision to document his ideas for his personal passion which was financial markets with a view to build a public profile and record of all work.

His passion for investment and market-related content dates back to his love for reading having started to notice the financial market data alongside the sports pages as a university student in 2004.

Lester is Trading Desk Analyst and has been with Unum Capital since July 2016.
Lester Davids
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