Mining giant RIO has dominated the news headlines today with the announcement of a $14 billion write-down of the value of it’s Mozambique coal project, and the resignation of CEO Tom Albanese.
The news has created market uncertainty about where the share-price is likely to go.
The write-down is an accounting measure. Trading conditions are unchanged with iron-ore profitability still strong at the moment.
The appointment of Sam Walsh to replace Tom Albanese as CEO is seen as a positive for the company.
Technical observations from the daily chart are as follows:
- The share-price has been in a sharp up-trend since late November reaching a high of $69.34 on January 3, 2013, from $57
- The share-price has retreated in the last two weeks before this announcement, finding support at $64.55
- Perhaps after the dictum “sell on the rumour, buy on the fact”, after the announcement the market rallied 3% to $66.60 at 1pm January 18.
- The market ambivalence is likely to increase volatility, and to provide trading opportunities.
- Institutional share-holders may well use the present strong buying market to sell-down their holdings and reduce risk.(distribution)
“Adumbration” for RIO from a technical perspective
- The key observation to make in the coming days is whether the present rally will carry the share-price higher than the last high at $69.34. This would confirm the present up-trend.
- Trend change below this level will suggest a swing towards the sellers, and the likelihood of lower prices.
- A breaking of support at $64.55 would herald a down-trend.
- Selling into buying support would avoid the risk of slippage in a falling market. It may be safer to delay buying into RIO until the share-price penetrates resistance at around $70.
The views above in no-way constitute investment advice; nor is any particular course of action recommended. (see Disclaimer)
- Ousted Rio Tinto boss pocketed £23m in cash and shares (guardian.co.uk)
- Rio Tinto gets new chief executive after shock resignation of Tom Albanese (abc.net.au)
- Analysts React to Rio Tinto Management Reshuffle, Writedown (blogs.wsj.com)
Categories: Chart Analyses
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