Chart analysis for RIO Jan 18, 2013

English: Mozambique (orthographic projection) ...

English: Mozambique (orthographic projection) Português: Moçambique (projeção ortográfica) Español: Mozambique (proyección ortográfica) (Photo credit: Wikipedia)

RIO falters

RIO falters

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)



Categories: Chart Analyses

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  1. Resilient Rio to Rebound « Technically Speaking

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