Tom Scollon

Mining stocks have risen over the last few days and so we ask, does this herald the beginning of a new dawn?

Let’s start with a chart of XMJ:

XMJ Daily Line Chart 

This suggests this buying is only a ‘dead cat bounce’ – that is it is an upward jump but maybe another leg down is not far away – like in the coming weeks.  One of the reasons why the index may be sent lower is that those who hold mining stocks and doubt the mining medium to long term prospects are likely to sell. Selling will gather momentum and eventually this will sink the index and its leaders such as BHP and RIO.

Let’s look at each:

BHP Daily Line Chart

In fact the above chart predicts a low by May 31.

RIO’s low is a little further out – mid June:

RIO Daily Line Chart 

My next routine is to look at a weekly chart and this time I am going to use a 300 week to look just that bit further out:


BHP Weekly Line Chart

This chart suggests a low for BHP of around $25 by year’s end – unthinkable several months ago.


XMJ Weekly Line Chart


RIO Weekly LIne Chart 

Both the XMJ and RIO weekly charts suggests the wave five low is not far away – but offers not even a glimmer of whether there could be a rally once the low is reached.  So we will have to wait another few months before we can really say much about this but it does appear we could see a period of consolidation before the next move.

Enjoy the ride


Tom Scollon