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A nightmare scenario for resources but a 245.65% profit dream for traders

by , 02 September 2019
A nightmare scenario for resources but a 245.65% profit dream for traders
In the first three months of the year, we saw a major rally on a number of resource stocks listed on the JSE.

Take a look at the chart of the JSE-Resources Top 20 Index to see what I mean…
 
During the 20% resource rally, we took full advantage and my Red Hot Storm Trader members managed to bank a total gain of 245.65% including a:
 
51.95% gain on Anglo American Platinum
44.75% gain on Kumba Iron Ore
47.77% gain on Anglo Gold
29.93% loss on Exxaro
41.10% gain on Anglo Gold
46.10% gain on Anglo American Platinum
18.38% gain on Kumba Iron Ore
 
If you missed out on this these profit opportunities, today is the day you can join the next expected resources run.
 
However, this time I expect the resource stocks and index to crash which we can take advantage of.
 
Let's get into it…
 
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Trump’s Friday tweet become a major danger for resources
  
On Friday, 23 August 2019, President Donald Trump sent out a tweet stating the US will increase tariffs on over $75 billion on U.S goods.  
 
He said, his administration would increase existing duties on $250 billion worth of Chinese products from 25% to 30% on 1 October. He also said the levies will rise from 10% up to 15%, on another $300 billion in Chinese goods which will start on 1 September.
 
This triggered BHP Billiton (one of the world’s largest mining and resource companies) to warn about the consequences of the US-China trade war.
 
They said the trade policies of Americans remain uncertain and if the conflict heats up, the prices for raw metals such as iron ore will not do well.
 
This is exactly what happened as we saw a number of resource giants fall in price, in the same week, including:
Exxaro was down - 4.28%.
 
Anglo American Platinum was down - 2.39%.
 
PPC lost - 7.5%.
 
Imperial Logistics fell - 2.27%.
 
BHP, Rio Tinto and Fortescue Mining Group hit their 6-month low prices.
 
And even the iron-ore commodity price fell over 6%.     
 
When in doubt sell resources!
  
It is clear this trade war is not coming to an end and so we shouldn't just hope for another resource rally.
 
Instead as a trader, we should look to take advantage and profit when the resources index and stocks crash.
 
Let’s bring back the JSE-Resource Top 20 Index chart (JSE-RES), so you can see how.  
 
Here's why this M-Formation is signalling a 12.14% crash with the JSE Resource Index

 
 
Looking at the daily chart of the JSE-RES, we can see there's been what's known as an M-formation forming since February 2019 (Grey shaded area)
 
In technical analysis, we call this a reversal double top pattern.  
 
This is because the market tests two extreme top or high prices which in this case they are at 48,000 and then comes down to two extreme lows (Black line) which is at 42,800.
 
When the price breaks below this level, we can expect the sellers to dominate the market which will cause a continuous drop in price.
 
To calculate the next target of the M-Formation for the JSE-RES you’ll simply use the Bottom-Top approach…  
 
Here is the calculation.  
 
Target = (Bottom - Top) + Bottom 
 
           = (42,800 – 48,000) + 42,800
 
           = 37,600
 
This means we can expect the JSE-RES to fall to 37,600 (12.14%.
 
And as the JSE-RES is made up of the top 20 resource companies, we can also expect the biggest resource stocks to fall in price with it.
 
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Here are two ways you can bank profits from the next resource index crash 
 
Either you can wait for my SMS where I'll send you resource stock trade ideas to (short) sell and profit from when the prices drop.
 
I’m talking about companies which are set to drop such as Kumba Iron Ore, Anglo American, Anglo American Platinum, Sasol, PPC and Billiton…
 
 
Trade well,
Timon Rossolimos,
Analyst, Red Hot Storm Trader 
 
PS: We are already in the money with our Billiton short trade, make sure you don’t miss the next resource stock profit opportunity coming next…


A nightmare scenario for resources but a 245.65% profit dream for traders
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