Technical Analysis: Mining sector makes new highs

2nd Jun 2009 11:07

The break above the highs of this year, on both the Reuters Jeffries CRB and Goldman Sachs Commodity Index last month, at 245.00 and 384 respectively, has seen commodity shares continue their rally over the past few days. They have also broken their respective 200 day moving averages, with the CRB doing that on Monday rallying up to 260. These indices represent key benchmarks of commodity prices around the world and these have continued to rise dragging world stock markets with them as fears about a further slump diminish. Key amongst this rise has been the rise in Oil prices from lows of $32 in January to hitting highs just below $70 on Monday. Copper prices, are also back at around $5,000, levels last seen in October, almost doubling in value from its lows at $2,817 in December last year.The mining sector, has rallied in tandem with these indices, doubling in value in the last 6 months, hitting a high of 16,104 on Monday. This doubling in value has translated into impressive rallies for the most heavily sold off mining stocks of last year. It is worth remembering, however that the mining sector was one of the most heavily sold off sectors last year, peaking at 30,745.80 in May last year, before bottoming at 7,788.05 in December. It has so far only managed to recover about 35% of those losses so far.The sector currently has channel line support around 13,826 and while this holds expect any losses to be limited.Anglo American: The hanging man reversal pattern in early May, which prompted a minor sell-off, bounced off the support line from the March lows, and subsequently broke the 200 day moving average, has seen this stock breaking above the January high of 1,832p to post a new high of 1,930p on Monday. It does have the potential to drift back to this support level around 1,467p, without negating further upside potential.Antofagasta: This stock continues to remain underpinned, trading in a steady uptrend since its October lows of 243.75p, but has so far been unable to sustain highs above 680p, and there does appear to be some resistance at these levels, having failed at this level previously in early May.The long term support line can be found around 534p area.BHP Billiton: as with the previous stock, BHP is finding it difficult to break above the 1587p highs that it posted in May. There is potential for a topping out formation as long as the 1600p level holds, but we would need a break below the 1355p May lows for this to happen. Rio Tinto: yesterdays rally saw Rio break the 3,000p level but it was also unable to make new highs and break above its May highs of 3,193p. It is currently above its 200 day moving average and currently has support around the 2,500p level.Vedanta: The star performer in the sector since May, and of all of the mining shares it has recovered over 50% of share price loss of last year. Its decline from its highs of 2,788p to its lows of 358.75p was dramatic but its rise back to near its 61.8% Fibonacci retracement at 1,860p has been no less remarkable, leaving its 200 day moving average far behind it. The high so far has been 1,771p. Xstrata: The slide back to the support line in mid May has seen this stock rally again, this time breaking its 200 day moving average and it has made marginal new highs for the year. It has also exceeded its November 2008 highs of 753p, peaking at 777p on Tuesday. The next target is the October highs of 850p, while the support line from the March lows is currently located around 637p.For periodic TA updates follow me on TwitterAlso read my Investors Guide to Technical Analysis and Level 2