China & resource stocks under pressure
What Mattered Today
The ASX200 was treading water over lunch, with most people considering their plans for the weekend until suddenly, Chinese economic data disappointed for the first time in many months. The result was a relatively painful grind lower, with the market closing down 24 points / -0.42%, led by resource stocks. China facing stocks had also received a secondary slap, when China's central bank again tightened monetary policy, adding to the trend since August. We believe this will eventually create the buying opportunity we have been targeting in some resource stocks.
Overall, activity was quiet across the broader market, but as mentioned above, iron ore stocks received a whack with heavyweights BHP and RIO down -3.11% and -2.86% respectively.
ASX 200 intra-day chart
We believe investors are complacently long the resource sector and they are likely to receive some real pain over the short-term. We are waiting for some panic selling before fading the weakness and buying the sector. Let's Look specifically at 3 major iron ore plays:
BHP closed down $0.84 (-3.11%) for the day and -6.3% below January's high. We are looking to buy BHP under $25 and ideally close to $24.
BHP Ltd (BHP) Weekly Chart
RIO closed down $2.66 (-3.96%) and suddenly the stock has dropped -5.7% from the week’s highs. We are keen buyers of RIO but under $60.
RIO Tinto (RIO) Weekly chart
The worst performer in the sector was from the pure iron ore play, Fortescue (FMG) which fell almost 4.59%. Similar to BHP and RIO, we like FMG at lower levels, FMG has fallen by -7.46% from the week’s high and a similar peformance next week will bring create some buying interest.
We are buyers of FMG ~$5.80.
Fortescue Metals (FMG) Monthly chart
We restrained from buying Star Entertainment (SGR) today because current momentum suggests lower prices next week.
ASX 200 Movers –
What Matters Overseas
FUTURES LOWER….
Disclosure
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Disclaimer
All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 3/02/2017 4.30PM
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