How Anglo's big plan will boost our resource sector

by , 08 April 2019
How Anglo's big plan will boost our resource sector
Over 90 days has passed for 2019, and the JSE is already up over 8% for the year.

This was mainly due to the ever-rising resource stocks, which make up a big percentage and weight of the JSE Top 40.

In fact, my Red Hot Storm Traders have managed to bank over 200% gains on six winning resource stocks this year alone.

If you missed this first quarter of profits, you have nothing to worry about.

Today I'm going to show you why I expect the resource market to continue its rally all because of Anglo American's big plan for 2019.
 
 
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Anglo Americans big plan to help boost our resource sector
 
It was announced that Anglo American is planning to invest more than $162 million, over the next five years, to help rehabilitate its mining operations in Australia. 
 
Here's what Anglo American Metallurgical business CEO Tyler Mitchelson said,
 
“Over the next five years (2019-2023), we’re investing more than $162m on industry-leading rehabilitation activities across our five mine sites."
 
"This approach is already delivering outstanding results."
 
You see, Anglo American has two open-cut, three underground mines and five metallurgical coal mines in Central Queensland. And as they continue with the plans to pursue with their mine rehabilitation, we can expect Anglo American’s price to shoot up. When this happens, you’ll see that pretty much all the big resource stocks will follow.
 
Here’s why. 
 
When Anglo flies the resource market follows

 
In the above image you can see that there are two charts overlaid on each other.  
 
The orange chart shows you Anglo American’s share price and the grey chart shows you the overall JSE-Resource index (JSE-RES). 
 
It is clear that when Anglo American goes up, the resource index follows. 
 
This means since 2015, there's been a positive correlation between the two. 
 
And now, thanks to the charts we can expect Anglo to fly where we can all profit. 
 
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This pattern is showing huge upside for the resource sector

 
 
Looking at the above weekly JSE Resource index chart, there has been a strong Cup and handle buying pattern forming since April 2015 up until February 2019. 
 
A Cup and handle is a pattern which is characterised by two rounding bottoms.  A big rounding bottom (cup) followed by a small rounding bottom (handle).
 
Since April 2015, the JSE-RES index has kept bumping on a horizontal level called a brim level.  
 
On 25 February 2019, the price finally broke above the brim level which showed that there was more buying power than selling power. 
 
If we calculate the difference between the high and the low price, of the Cup and handle, and we add it to the brim price level – we'll get the first target we can expect the JSE-RES price to rise to.  
 
Target = (Brim level - Low) + Brim level
           = (45.79 - 23.55) + 45.79 
           = 68.03
 
This means we can expect the JSE-RES index to rise to 68.03. 
 
This is great news for you because, we can expect two things.
 
First we can expect Anglo American’s price to rally which gives us a no brainer profit opportunity, due to the positive correlation I mentioned earlier. And second, we can also expect the other top resource companies listed on the JSE to rise as well.  
 
I'm talking about trading opportunities such as, BHP Billiton, Kumba, Exxaro, Sasol and others.  
 
If you'd like to take advantage of the resource rally and never miss a profit opportunity, then why not try my Red Hot Storm Trader service on a 90 day risk-free trial.
 
“Wisdom yields Wealth”
Timon Rossolimos,
Analyst, Red Hot Storm Trader
 
P.S: Would you like a full analysis on one of your trade or investing positions?
 
You can email me your question at timon@fsp.co.za and you'll stand a chance to be featured in one of the Trading Tips articles on Monday or Wednesday.


How Anglo's big plan will boost our resource sector
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