This week, we delve into the world of natural resources and chart the Chinese company, Chalco. Mining giants BHP Billiton and Rio Tinto have dominated the headlines of late, with BHP aggressively pursuing a bid to acquire Rio.
BHP's bid would create a natural resources group worth more than $300 billion with leading positions in iron ore, copper, aluminium, coal and uranium. BHP first made its three-for-one proposal to Rio in November, having looked at buying its rival several times in the past decade. Marius Kloppers, BHP's chief executive, said the deal would create annual synergies of $3.7 billion within seven years, with large savings coming from the companies’ iron ore mines in Western Australia. But Rio CEO, Tom Albanese, has said that BHP’s 3-for-1 offer, which values Rio at US$147 billion, is “several ballparks away” from what his group would accept.
The saga took a dramatic turn in early February when Chinalco, one of China’s largest mining companies bought 12 percent of Rio's UK-listed shares together with Alcoa of the US.
Market chatter says Chinalco (the parent company of Chalco) and Alcoa could raise their stakes to as much as 20 percent, a move that may help China's top alumina producer defend against high prices for raw materials.
Chalco shares have rebounded 35 percent from their recent trough in January but were still 50 percent off their peak of HK$26.35 in October due to a global selloff and rapid growth in China's alumina and aluminum production.
BHP, Rio and Chalco are likely to remain in focus this week after Asian steelmakers agreed to a 65 percent hike in the price of iron ore after annual price-setting talks with Brazilian miner Vale. BHP and Rio have yet to agree on prices.
Commodity Store with Sri Jegaraja
The Chalco chart is a complex chart that captures a potential developing trend change. The initial trend break is a rally rather than the start of a new uptrend. Traders are driving the rally, but investors are not yet convinced that there is a genuine change in the future valuation for Chalco. This is suitable for aggressive traders.
We start with three bearish features of the chart.
Initially they signal a rally that is capped by the strength of the long term GMMA. These bullish features provide a guide to the technical signals necessary to confirm a trend change. They are:
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