Wealth Within- Iron Ore Price: Where Is It Headed Now?

By Janine Cox

In May, I discussed the iron ore price and the big iron ore miners. I also mentioned how the iron ore price was fast approaching the cost of production for some of the smaller miners and as this occurred we have seen a number of these stocks fall quite hard.

Looking at what has occurred and what the previous analysis of iron ore price indicated, you may recall that I suggested in May how the iron ore price could continue to fall to between US$80 to $84 per tonne in late 2014 and into 2015. In summary, I mentioned that this decline was likely to occur over the next 12 months between $80 to 97 per tonne.

At the time of the previous analysis, I identified an important level at around US$99 per tonne and since then the iron ore price has fallen through this level to the next level of support just below. To determine a number of support and resistance levels we apply a whole series of analysis to a chart, including technical analysis called Elliott Wave, as well as other techniques so as to come up with a number of target levels for both the downside and the upside on iron ore. The lower target mentioned was US$80 to $84 and is still possible given the fall to $92.74 last month.

The technical analysis we apply is applicable to any stock, market, currency or commodity, in fact, it applies to anything you can measure in terms of price history. We have seen the iron ore price come back to around 50 percent of the all-time high price of US$187.18, which occurred a few years ago in 2011.

Since then we have seen the iron ore price continue to track lower. If the price of iron ore rises from here, and I believe this is likely, we could see it trade back above US$100 per tonne in the short term. Currently, the short term target is between US$100 and $110. As an analyst and trader it is important to always consider both directions when forming a view so as to remain flexible in the event conditions change.

As we see price unfold we can firm up our targets/analysis. Currently, we are seeing support for a higher iron ore price and therefore US$100 to $110 is quite probable for the upside. Big miners like BHP, RIO and FMG have shown strength in their share prices, however, bear in mind this could be a temporary move. BHP is looking a lot stronger than the other two and as mentioned previously, it has traded sideways while the other two have fallen dramatically into their lows.

There is a strong level of resistance overhead between US$97 and $100 and another level below this to consider, being a combination of a percentage of the all-time high price and other levels, which is between US$71 to 73.

As time goes on we know that the market for iron ore will change, demand out of China will of course have a bearing on the iron ore price.

Following a move out of the low in June we are now watching for a move through the US$100 level as the real test. If we see a short term move up above this level and a rise closer to US$110 then US$80 to $84 becomes less likely. However, if price struggles to hold above this level I believe it is more likely to come back to test US$92.74.

Janine Cox Wealth Within

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