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BHP Billiton - lock in 41% profit

BHP Billiton is the world's largest miner and one of Australia's largest stocks by market capitalisation. After roaring as high as $45 during the commodity boom which ended in 2011, the stock has been a miserable performer since then, reaching a low of $14.06 back in January 2016.

After initiating a recent trade in the stock at $17.70 back in June on one of my trading to Time dates, it is now time to take profit as BHP has hit some critical price resistance on a key Fibonacci Retracment level (see chart below).

BHP - 11 Nov 2016 exit level

click to enlarge image

So where to next for the world's largest mining stock?  Let's explore...

I think the first clue is to take a look at the long term price chart of "Dr Copper" (below) which BHP is a major producer of.  (A big thanks to Gary for alerting me to the move!)

Notice how high grade copper has been trading in a clearly defined bear channel for almost four years.  The recent price action however, has seen copper push incredibly higher breaking through this bear channel for the first time in years. The move in copper actually began on 24 Oct, but it was the stunning win by US President Elect, Donald J Trump which catapulted this market into the mini stratosphere.

Copper - 11 Nov weekly chart

click to enlarge image

The market is interpreting a Trump presidency as bullish for base metals such as copper and steel, as these will be essential materials required to carry out Trump's planned rebuild of United States infrastrucutre assets.

In the meantime, we need to keep watching the trend channel that copper has just broken. Normally, markets will often break through these trend channels and move back to re-test the line which was broken before resuming trend.

To me, this indicates that $25.05 may prove to be only an temporary resistance for BHP.  If copper resumes its bullish trend, then it will inevitably take BHP higher.  Let's just wait and see.

Until next time...

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Wednesday, 29 January 2020

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