European miners are on the brink of a big breakout, according to DayByDay

Europe’s mining stocks -- which have wilted after a stellar 2016 -- are on the brink of a major technical breakout that could revive their rally and send the sector’s index to 2012 highs, according to Matthieu Driol, senior chartist at DayByDay, in Paris.

The sector’s gauge, home of the world’s top miners such as Rio Tinto Group and BHP Billiton Ltd., more than doubled between mid-January 2016 and late-February 2017, propelled by a recovery in global economic growth. But it has since drifted lower, weighed down by falling metal prices including iron ore.

Over the past 10 days, however, iron ore prices have risen and the index has regained technical positive momentum, with charts showing it crossing back above its 50-day and 200-day moving averages as well as above a bearish trendline started in February, when the sector started to lose steam.
“The sector has been in consolidation mood since February, which is quite logical given the strong gains of last year,” Driol said by phone.

The index needs to close the week above a key resistance level at 405.15 points to confirm the positive breakout, he said. The index is about 25 percent below its 2012 peak.

“If this happens, it would undoubtedly be a significant surprise for investors who have lost hope for the sector. The index could quickly surpass February highs and rally towards levels not seen in five years.”

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

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