whats in store for bhp next week

OK, so we've had a rough couple of weeks within mining stocks in general. Probably most of you will own RIO and BHP, as no joy there. Lets take a look at the index, then BHP technicals, then fundamentals.

And Hamrun - cheers mate. I'm glad I haven't lost my ability to post (as yet) with the market bottom call yesterday.

XAO
Lets take a look at the technicals.
- Yesterday, we had some serious selling in a huge V shaped, capitulation/panic selling environment which I called the bottom. Funnily, this was somewhat mimicked by the US. As we don't usually lead the US, perhaps this suggests capitulation selling all round, and a bottom in place.
- Our XAO index has now had a 100% fibonacci decline using the start of the last bull run commencing jan 07. This level was respected yesterday as significant support and we bounced heavily from there.
- We are now well below our 200dsma, along with the FTSE and DAX and of course, poor little Nikkei. The US, on the other hand breeched it last night, but respected it, closing above the 200dsma.
- A rebound to the next fib retracement of 61.8 would see us about 200 points above our close of today, and should be the next level of resistance. A more convincing bounce would take us between the 38.2 and 50% fib levels as well as february highs in the vicinity of 6000. I would say that at these index levels, you should take long profits, and wait. This could act as significant resistance, and just give more speed and strength to the subsequent down move (if this is not a correction). A break above 6100 would confirm the current uptrend, and I would say, would be a good level to start looking at stocks trading below historic PEs.
- The MACD histogram is showing a very slight neutral to bullish divergence. But the MACD itself is showing no signs of a recover as yet. I would think the next rally will be significant, and will certainly confirm a rebound using this parameter.
- RSI is at 30, at the level of the bounce in february, as well as may 06, so could suggest a bounce as well. Again, there is no uptick as yet, so a bit premature to suggest a definite buy signal.
- Stochastics indicate half a buy (Sorry for that). The faster %K has crossed the %D however both are not yet above 20. Once this occurs, we should have buys on all lagging indicators.
- Volume was massive on the negative hammer (Not really sure what to call it) day yesterday, and hopefully this suggests a reversal. Like I said yesterday, a reversal will need to be confirmed by a positive day with the close above the high of thursday.

BHP Technicals
- Respecting february highs is a good thing (In fact, this are around 29.40). After yesterdays long tailed negative doji (sorry again, not sure what to call it), todays higher high, but negative close suggests serious indecision.
- Unfortunately, MACD histogram has a trend confirmation for DOWN, and the RSI is at a level consistent with a subsequent rebound.
- The 200dsma has not yet been reached, so BHP is outperforming the index at this stage, even with its disconcordant loss in percentage terms.
- The 200dsma as well as 50% fibonacci retracement levels sit around $30, which will act as MAJOR SUPPORT should things go pear shaped tonight.
- BHP tends to run in $4 and $8 lots, and $32 has been reached and overshot. $32 is also strong support.

Fundamentals
- Metal prices taking a big hit with rising copper stockpiles 3 days running. Metal prices have been liquidated recently with a flight for liquidity rather than a reflection of the underlying value. Therefore, metal prices play little weight on the price of BHP currently, compared with the weight of the index.
- Company earnings - due to release this coming wednesday, this should provide some interesting insight into rising costs and the impact of the AUD. Remember, every 1c that the AUD rises against the USD accounts for 69mil in NPAT LOSS. Luckily for us, AUD/USD is back around 80. Company profits are generated on approximately 83-85c. Provided earnings are in line or better than expectations, we should see a significant boost to the stock price. Remember, last year the price of BHP was hammered down due to falling oil prices more than anything.


Conclusion:
1. Long term BHP holders should add to their positions at current levels, assuming that my prediction of a bottom in place, and subsequent reversal situation is confirmed tonight in the US.
2. Shorter term players could see trades at $32-$33 with stops at $31.50-$32.
3. Disregard metal prices until the volatility in equities has resolved.
4. A buy before company reports SHOULD be rewarded, but rising costs may hinder increased profits from increased production.
5. BHP has outperformed RIO and the index, and therefore, is not immune to further downside. Significant support at $32 and $29.30.


My trades: I bought more BHP, RIO and LGL today.

Happy trading.