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Wednesday, June 9, 2010

Charts of Basic Materials Stocks, AA,CLF,FCX,RTP

- The overall market found support once again at around SPY level 105 yesterday. We are seeing a technical rebound, and as I expected, basic materials sector is leading the rebound. This sector has been beaten down hard by confluence of fears; 1) European Economic collapse and 2) Chinese economy's hardlanding. The strength/weakness of the US dollar/Euro has been the telltale signal reflecting the level of these fears. UUP is an ETF that follows the strength of the US dollar, and its price fell yesterday and is down today as well at the time of this post.
- Looking at the charts on 4 basic materials stocks, AA, CLF, FCX, RTP, I see that the short-term price trend has been extremely bearish. As prices of each of these stocks are rebounding, I would expect bearish traders to short these stocks once each stock price rebounds to the top of each channel trend lines. But I am a long-term bull on the basic materials sector. http://www.miningweekly.com/article/demand-for-iron-ore-copper-to-double-in-15-years-rio-tinto-2010-05-26 The CEO of Rio Tinto on Wednesday, May 26, stated that demand for iron-ore, aluminum and copper to double over the next 15 years. That averages out to 4.75% growth in demand per year, which is not out of this world, but nevertheless represents a secular growth story.
- Relatively speaking, CLF chart shows the most strength, then RTP, then AA, then FCX. The reason is that while FCX stock prices have seen lower lows, CLF stock prices are showing higher lows. I would not doubt, that if these stocks continue to rebound, CLF would be the first to break out of the current extremely bearish trend. I would keep watch on these stocks over the next few weeks, confirm that they have broken out of the extremely bearish trend, and look for opportunities to accumulate these stocks when prices dip.

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