The UK Index ’s Miners, beloved of retail investors, have been doing rather well of late, posting gains of up to 15% since Trump’s election on hopes he will unleash a huge programme of fiscal stimulus and US infrastructure spending. This fresh requirement of raw materials like Copper, Aluminium, Zinc, Iron ore, etc, could breathe a new lease of life into the 2016 commodity price recovery. The metals may have come off their best levels this week, however, they are teasingly close to supportive rising trendlines which bodes well for a potential bounce that could help revive the Miners’ own 2016 price recoveries.

Technical analysis suggests all information is in the price and thus visible via charts. Those trading the Miners thus have a distinct advantage in being able to look not only at the chart of the stock they want to trade but also at charts for the Miner’s most important material. One can use the latter to confirm the former, or even contradict, helping you decide whether to go through with a trade or indeed hold off. At present, Copper Miner Antofagasta (ANTO) sits just above 2-week support in an accelerated 2016 uptrend. The chart for its key red metal looks primed for a bounce from 2016 rising support. Good news.

The same exercise can be done for the likes of Glencore (GLEN), BHP Billiton (BLT), Rio Tinto (RIO)  and Anglo American (AAL), all near helpful rising trendlines of support. Those looking for even more assistance and confirmation can also use the chart for the US$ Index (trade weighted average), important because commodities are dollar-denominated and so a weakening of the US$ can boost demand for raw materials by making them cheaper for non-US$ buyers.

I put can in italics because, since Brexit, the USD is much stronger and the GBP much weaker. USD strength ahead of a Fed rate rise and driven by Trump policy has, however, not been much of a hindrance for the Miners recently. Markets like the idea of US rate rises if they are because inflation is on its way back. In fact the corresponding GBP weakness has been a boon, offering a handy translational gain for all their internationally generated profits.

The reason for the Miners edging back this week relates more to fresh GBP strength (denting the value of future profits) on hopes that the UK could pay for access to the single market – dubbed a soft rather than hard Brexit – a scenario which would likely impact business less when the UK leaves the EU. Some pausing for breath around the OPEC meeting was also responsible along with much soul searching about risk appetite ahead of this weekend’s political events on the continent.

So while the Miners look primed for a bounce and their related metals prices too, just bear in mind the other moving parts that can impact the share prices. Overall what we are looking for is a bounce by the metals prices, more USD weakness than GBP strength (or vice-versa) and any positive news on the US or China which might suggest need for even more materials. A higher oil price thanks to Russia confirming a production cut to help OPEC buoy prices would likely also help, as would more QE which is highly anticipated from the ECB next week.

Several moving parts I know, but overall a positive picture. Just make sure you look before you jump, and always seek conformation. The devil is in the detail, the clues are in the charts.

All the above are things our traders and research department keep an eye on and write about daily. So what are you waiting for? Get access to our research now so we can help you find your next trading opportunity.

Have a good weekend,

Mike van Dulken, Head of Research, 2 Dec