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Stocks to watch: mining, metal and might

In this week’s stock to watch, Tony Sycamore explores three Australian mining companies currently setting the trend.

Source: Bloomberg

Article prepared by Tony Sycamore

ASX 200 overview

Despite a soft session on Friday, the ASX 200 added another 0.6% last week to close at 7302. The Materials (+4.1%) and IT (+2.3%) sectors outperformed, while Energy stocks were the main drag. At an index level, the ASX 200 is now just under 4% from its all-time high, excluding dividends.

The impetus for last week’s gains was dovish comments from Fed Chair Powell. The market expects the Fed to slow the pace of its tightening cycle as early as next week’s FOMC meeting.

There are signs that an earlier-than-expected re-opening for China is on the horizon and a deceleration in the pace of Fed rate hikes should be a positive for ASX 200 listed commodity and energy stocks, three of which we look at in the article below.

  • BHP

The share price of Australian mining and metals giant BHP Group Ltd (BHP) has, like many stocks, been on somewhat of a roller coaster ride in 2022.

The share price of BHP soared after the Russian invasion of Ukraine towards $48.00 before falling 25% to below $36.00 on concerns of a global slowdown and China’s dogged pursuit of Covid Zero.

The stock has since rebounded in line with the recovery in global equities over the past two months to be eyeing the $48.00 resistance level it failed from earlier this year. At the very least, this suggests some caution is warranted in chasing the Big Australians share price higher at this level.

Technical-based traders would likely need to see a sustained break of downtrend resistance and former highs $48.00/50 region to open a move towards $50.00.

BHP daily chart

Source: IG
  • Woodside

It’s been a big year for Woodside Energy . The company’s P&L has benefited from the Russian invasion of Ukraine and the European energy crisis. It also completed a merger in June with BHP's petroleum business, which catapulted the company into the world's top ten independent energy companies.

In November of this year, the share price of Woodside made a fresh year-to-date high at $39.58 after breaking above the downtrend resistance at $35.00, coming from the 2014 $43.74 high. The share price has since pulled back to near $35.00, where buyers have emerged ahead of the trendline in recent weeks, perhaps looking to position for the China re-opening and another leg higher in energy prices.

Providing the share price remains above the support $35.00/50 area, the uptrend remains intact, and a retest of the November high is possible. Aware that a sustained break below support at $35.00/50 would warn that a deeper pullback is underway.

Woodside weekly chart

Source: IG
  • Newcrest Mining

After spiking to a high of $2070 shortly after the Russian invasion of Ukraine, gold plunged over $450, dragging the share price of Newcrest Mining even lower from $28.96 to $15.72.

Expectations of a deceleration in the pace of Fed rate hikes along with a lower US dollar and yields in recent weeks have helped the price of gold rebound by almost $200 and, with it, the share price of Newcrest Mining.

While the price of gold is now trading above its 200-day MA at $1795, the share price of Newcrest has lagged. It currently trades at $21.16, just below its 200-day MA of $21.60.

Should gold continue to hold and move above its 200-day MA at $1795, it should encourage ASX traders to take the share price of Newcrest towards the $23.08 low of March 2021.

Newcrest Mining daily chart

Source: IG

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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