Technical Analysis: Miners start to slip back

14th May 2009 13:45

The continued rise of commodity prices have served to underpin the mining sector over the past few months and seen the prices of some mining stocks double. There is a concern that commodity prices may have peaked in the near term, as we have seen both the Reuters CRB Index and Goldman Sachs Commodity Index (GSCI) start to retreat from their highs. In fact the CRB is finding it difficult to break above its highs for the year, around 245.This in turn, has translated to profit-taking in a number of mining stocks, as the market looks to take profits on these gains over the past few months. The stocks that fall into this category are as follows; Anglo American - its share price has gone from lows of 906p in March this year, to highs of 1647p at the end of last week. Not quite a doubling of the share price, but it has run straight into resistance at the top of its upward trend channel, and the 200 day moving average. It has also posted a classic candle stick reversal warning (hanging man) which has prompted a bout of profit-taking back to its support line around 1,350p. Antofagasta - its share price has gone from lows of 243.75p, late last year, to highs of 677p last week. Since we made these highs, which also coincided with the highs in June 2008, we have seen profit taking kick in, and the price is currently falling back towards the bottom of its upward channel. It should also find support around the 200 day moving average if it manages to drift down there.A break and close below the trend line support from the lows in November last year, could see a correction towards the February and March lows around 380p and possibly lower.BHP Billiton - its share price has gone from lows of 731.50p in November last year, to highs of 1,587p last week. Since the break above the 200 day moving average in March, the market has traded in a slightly upward wedge formation, which appears to have broken towards the down side. This move could be a precursor to a further decline back towards the aforementioned average. There is also a longer term support line which is currently moving up to converge with the average. A break below this support zone could further increase downward pressure, and prompt further profit-taking toward the 1,000p lows in early March.Rio Tinto; the rise in the Rio share price has been startling, from lows of 995p in December to posting highs of 3,193p last week. However these gains have to be set into the context of a decline from the highs at 7,167p in May 2008. The peak to trough decline was in excess of 85% so a rebound of sorts was inevitable. The rebound, however only accounted for a retracement of just short of 38.2% of the actual decline. The rally did manage to briefly recover above its long term (200 day) moving average, but it has since fallen back below that and was unable to get back above its post October crash highs of 3,195p. There is some trend support coming in around the 2,090p level and there is the possibility that we could see a drift back towards a test of this area. Xstrata - its share price has gone from lows of 288.75p in March, to highs of 732p last week. The failure to get above its November highs of 750p, and also the 200 day moving average has seen the share price decline and there is a danger now that we could have seen the highs of this rally.A break and close below the trend line support from the lows in March this year, could see a correction towards the April lows around 480p. For periodic TA updates follow me on TwitterAlso read my Investors Guide to Technical Analysis and Level 2