ChartWatch Markets: BHP, CIA, FMG or RIO – Which ASX iron ore stock is the best? Plus, can you trust the bounce in US stocks?

In today's edition of ChartWatch Markets, we'll be covering the technicals for:

• Nasdaq Composite

• Iron Ore 62% (Front month, back-adjusted) SGX

• BHP Group (ASX: BHP)

• Champion Iron (ASX: CIA)

• Fortescue (ASX: FMG)

• Rio Tinto (ASX: RIO)

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Nasdaq Composite Index

Analysis

A super strong candle on Monday. Total demand side control, albeit in an orderly fashion with respect to volume. Highly motivated demand, an average amount of it, took out an average amount of supply that backed away / was consumed into the close.

The close / high is tickling the dynamic supply of the short term trend ribbon. That’s a good sign. I also note we closed well above the balance point of that massive Thursday supply-side candle – likely therefore clearing much of the latent supply that may have been hiding in its range. Another positive.

Nothing else has changed with respect to:

(Consistent with demand-side control = ✅ vs Consistent with supply-side control = ❌)

1. Short and long term trend ribbons: ⬇️/⬇️, contracting (getting weaker), the price is below both ribbons and both ribbons are acting as a zone of dynamic excess supply = ❌✅.

2. Price action: Falling peaks and falling troughs (i.e., demand removal and supply reinforcement) = ❌.

3. Candles: Apart from the last one, generally supply-side control (i.e., black-bodied candles and or upward pointing shadows) = ❌.

❌✅❌❌

It's still a MOTN (More Often Than Not) price to trend down proposition. Clearly though, the Comp's technicals are better than before Monday's candle, and we now await further confirmation the demand-side is moving back in / supply-side has backed away... or otherwise! The candles and price action will tell us everything we need to know!

View

I remain comfortable at 1/3RP in my Risk Bucket 🪣 for now. (i.e., my personal allowable capital allocation limit (i.e., Risk Position) for my investments in US stocks is 33%).

Key levels

The next critical zone of demand is 22058-185 – below it, the short term trend is unequivocally down and the long term uptrend is likely under significant pressure = ⚠️ The short term trend ribbon (presently 22865-22885) is the nearest critical zone of supply – the Comp must close above this zone with a strong demand-side candle to confirm the demand-side is moving back into control of the Comp's price.

Iron Ore 62% (Front month, back-adjusted) SGX

Analysis

The last time we covered was in ChartWatch Markets on 16-Oct.

It’s been a long time, but as noted in that update – run just after iron ore failed to breach the critical 108.20-108.95 supply zone – “I can’t see iron ore going anywhere in a great hurry…neutral here”.

Here we are nearly 6 weeks later, and after another test and fail of the supply zone, then plunge back to, test, and hold of the long term trend ribbon – iron ore is at it again!

We are approaching 108.20-108.95 with some purpose: rising peaks and rising troughs, a predominance of demand-side candles, and the short term trend ribbon again acting as a zone of dynamic demand. The long term trend remains a “modest but developing” up.

We’ve added two more points of supply since that October update in the forms of 107.45 and 107.55. They will need to be consumed to allow a test of the big one.

View

The technical picture is substantially improved from a couple of weeks ago, but ironically similar to 6 weeks ago. Constructive (perhaps even deserving some optimism!), but not enough to shift me from my neutral / maintain risk “=R” view here.

Key levels

There's a wall of supply between 107.45-108.95. I could move to +R (comfortable to add risk on demand-side candles) on a strong close above 107.45. The closest point of demand is 103.25. If the iron ore price closes below this point, the short term trend is nuetralised.

BHP Group (BHP)

Analysis

A super quick check in on the major ASX iron ore stocks. High level technicals and key levels only. Alphabetical order.

Consistent with demand-side control = ✅ vs consistent with supply-side control = ❌:

• ST / LT Trends ⬇️/↔️; the short term trend ribbon is down, it has failed as a zone of dynamic excess demand and is showing early signs of acting as a zone of dynamic supply ❌ the long term trend ribbon is neutralised and the price has closed below the long term trend ribbon ❌

• Price action: falling peaks and falling troughs with decent separation between the peaks and troughs (i.e., credible supply reinforcement and demand removal) ❌

• Candles: Arguably skewed towards supply-side predominance since the 30-Oct 44.55 major point of supply ❌

❌❌❌❌

View

The chart demonstrating the least demand-side control / greatest supply-side control. My model requires zero risk position ("ZRP" i.e., no risk exposure is allowed).

Key levels

40.17 is the closest point of demand, if the BHP price closes below this point, a bearish "Turnaround Setup" will be in place, and therefore my model allows for short selling / "-R"). 41.91 is the closest point of demand, the short and long term trend ribbons are also likely to act as zones of dynamic demand. A close above the short term downtrend ribbon is required to demonstrate the demand-side is returning to control.

Champion Iron (CIA)

Consistent with demand-side control = ✅ vs consistent with supply-side control = ❌:

• ST / LT Trends ⬆️/↔️; the short term trend ribbon is up, it appears to be acting as a zone of dynamic excess demand ✅ the long term trend ribbon is neutral but is compressing towards a transition to uptrend and the price has closed above the long term trend and the long term trend ribbon is acting as a zone of dynamic demand (i.e., the price has bounced off the long term trend ribbon) ✅

• Price action: rising peaks and rising troughs, but somewhat compressed (i.e., modest supply reinforcement and demand removal) ✅

• Candles: Somewhat mixed, but after today, arguably skewed towards demand-side predominance ✅

✅✅✅✅

View

The CIA chart is demonstrating credible demand-side control. This is a text-book "Turnaround Setup" under my model, and therefore it allows for maintaining current risk exposure ("=R"), or if allowable under my portfolio management model (i.e., there's room in my "Risk Bucket"), adding risk "+R".

Key levels

5.70 is the closest point of supply, a close above this price is strong confirmation of demand-side control. 5.03 is the closest point of demand. Below this point, the short term trend is nuetralised.

Fortescue (FMG)

Consistent with demand-side control = ✅ vs consistent with supply-side control = ❌:

• ST / LT Trends ⬆️/⬆️; the short term and long term trend ribbons are up, and both appear to be acting as zones of dynamic excess demand ✅✅

• Price action: rising peaks and rising troughs, but somewhat compressed (i.e., modest supply reinforcement and demand removal) ✅

• Candles: Somewhat mixed, but after today, arguably skewed towards demand-side predominance ✅

✅✅✅✅

View

The FMG chart is demonstrating credible demand-side control. This is an early stage "Continuation Setup" under my model, and therefore it allows for maintaining current risk exposure ("=R"), or if allowable under my portfolio management model (i.e., there's room in my "Risk Bucket"), adding risk "+R".

Key levels

21.53 is the closest point of supply, a close above this price is strong confirmation of demand-side control. 19.63 is the closest point of demand. Below this point, the short term trend is nuetralised.

Rio Tinto (RIO)

Consistent with demand-side control = ✅ vs consistent with supply-side control = ❌:

• ST / LT Trends ⬆️/⬆️; the short term and long term trend ribbons are up, and both appear to be acting as zones of dynamic excess demand ✅✅

• Price action: mixed and compressed (i.e., consolidation / indecision) ⚖️

• Candles: Somewhat mixed, but arguably skewed towards demand-side predominance ✅

✅✅⚖️✅

View

The RIO chart is demonstrating credible demand-side control – certainly is has the strongest long term trend. However, the short term trend is less convincing. This is a "Continuation Setup" under my model, and therefore it allows for maintaining current risk exposure ("=R"). Given there's some indecision in the demand-supply environment, I would prefer to see a strong demand-side candle (i.e., long white-bodied and or long downward pointing shadow) before considering adding risk "+R" (assuming it's allowable under my portfolio management model).

Key levels

135.24 is the closest point of supply, a close above this price is strong confirmation of demand-side control. 127.31 is the closest point of demand. Below this point, the short term trend is nuetralised.