Earlier in this series, we analyzed iron ore miners’ ratings and estimates. In this article, we’ll discuss these miners’ technical indicators.
Traders and investors look at technical indicators when making market entry or exit decisions. Moving averages and the RSI (relative strength index) are among the most widely used technical parameters. Generally, an RSI of below 30 signifies an oversold position, and an RSI of above 70 is associated with an overbought position.
Based on their December 6, 2016, closing prices, Cliffs Natural Resources (CLF), BHP Billiton (BHP), Rio Tinto (RIO), and Vale (VALE) are trading 51%, 8%, 10%, and 28% above their 50-day moving averages, respectively. Their 20-day moving averages indicate similar trends. The 14-day RSIs for these miners are also nearing oversold levels. This is especially true for Cliffs, Vale, and Freeport McMoran (FCX).
While miners look slightly overvalued according to these indicators, there may not be an immediate pullback in prices. While the current commodity (DBC) rally seems to be providing momentum to mining stocks, it would be advisable to look at these investments from a more long-term perspective to see which can sustain a price advantage.