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Copper to lift BHP Billiton
Colin Abrams
Posted: Tue, 17 Apr 2007
[miningmx.com] -- BHP BILLITON, the second largest stock on the JSE, has large interests in copper mining (among other resources).
We take a look at BHP Billiton’s chart, which is showing an interesting development.
We also look at a chart of the copper price itself, which is on a recovery path and pointing to a target price. In fact, BHP Billiton has broken out above an important resistance level and is now pointing to far higher prices in the months ahead.
Likewise for the copper price itself, which is on its way to retesting its all-time high. Together this is bullish news for the JSE as a whole.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
colin@themarket.co.za
BHPBILLITON – BULLISH BREAKOUT
Click on image to enlarge
Trend: Up, but overbought in short term. Long-term up.
Strategy: Traders tighten stops. Re-enter after a pullback.
The bigger picture shows BHP Billiton having recently broken out of a large broadening formation (lines 1 and 2). That’s significant.
The only short-term concern is that the relative strength index (on top) is giving a negative divergence from the overbought level. That points to a short-term pullback to occur at any time.
Traders tighten current trailing stops to a breaking of the prior two-day low. Then look to re-enter (buy) on an upward reversal off line 1 (R158,50) or lower. Investors keep holding regardless.
The minimum upside target (medium-term) is R198 – ie, the height of the pattern projected up.
When buying after a pullback place your initial stop-loss as a breaking of the low reached before reversing up from the R158 level or lower.
COPPER (US$) – BOUNCING BACK
Click on image to enlarge
Trend: Up again.
Strategy: Buy pullbacks on an ongoing basis.
The copper price has staged a good recovery and broken out above line 2 of a large broadening formation (with line 1). It’s also moving back above the 200-day moving average, which is a bullish sign.
The daily stochastic oscillator (on top) is somewhat overbought, so caution is advised over the short term.
Use pullbacks here to buy the copper price (via the futures market). But it’s also a good indication for SA copper shares, such as BHP Billiton, Metorex, etc. Medium-term players can simply hold all the way up.
The price will retest its all-time high of 8,783 (from May 2006) in the months ahead and then on to 9,000 as its minimum target.
Place your initial stop-loss is a closing price below 6,600 on its spot price.
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