FCX stock, Vale (VALE) and other mining stocks could be setting up for another run, after consolidating big gains over the past year. Rio Tinto (RIO), Teck Resources (TECK) and BHP Group (BHP) join Freeport-McMoRan (FCX) and Vale stock on this weekend’s watch list.
As stock market leadership shifts back and forth between cyclical plays, including mining stocks, and interest-rate sensitive growth stocks, these are key stocks to keep an eye on.
Even with a recent consolidation, the Mining-Metal Ores group is ranked No. 20 out of 197.
While growth stocks have had the upper hand lately, a rise in interest rates as the global economic recovery marches ahead is only a matter of time. A big U.S. infrastructure spending bill looks likely to give miners another boost. Plus, green-focused mining stocks like FCX stock have a foot in both camps. At the moment, though, Vale stock is the standout among the group. Politics, especially in key mining countries like Peru and Chile, will also be in focus as the threat of stiff new royalty payments rises.
The Brazil-based miner was featured as the IBD Stock Of The Day on Wednesday. The company, a major iron ore, copper and nickel producer, just exited its coal business. Vale said in April that it’s considering a spinoff of its base metals business focused on iron ore, a key ingredient in steel production.
RBC Capital analyst Tyler Broda wrote in a June 3 note that the spinoff could free up $16 billion to spur growth, while giving investors access to a green-metal pureplay.
Unlike FCX stock and some of its peers, Vale did not pull back to its prior base. Vale stock’s relative strength line, showing its performance relative to the S&P 500, is right at a multiyear high.
Vale also has a stellar 99 IBD Composite Rating, a single score factoring in both fundamental and technical strengths.
FCX stock, the largest pureplay copper miner, also has a new buy point, five weeks into its own flat base, MarketSmith shows.
FCX stock is about 11% below a 46.20 buy point, a weekly MarketSmith chart shows. However, FCX stock’s current bounce off its 10-week and 50-day moving averages in the past couple of days is also actionable as an early entry. That’s the case when stocks remain above the prior breakout point when they bounce off the key support level.
Investors may want to wait for FCX stock to its 21-day exponential average, an area of resistance last week. Another early entry is 44.50.
After hitting a 9-year high in early May, FCX stock eased back, along with the copper price. Copper has slipped from about $4.88 a pound to $4.53. While more supply is coming online in the next couple of years, copper is expected to face a supply deficit starting in 2025.
Teck stock, a diversified Canadian miner, is a relatively minor copper player, but that is expected to change a little more than a year from now. Teck is on track to start production at its Quebrada Blanca phase-two copper project in Chile in the second half of 2022.
Deutsche Bank analyst Abhi Agarwal upgraded Teck to a buy from hold on May 26, saying the stock is “close to a re-rating,” as QB2 transforms its portfolio and creates and drives free cash flow.
Teck stock found support at its 10-week line in the past week, but at 23.66, still sits just below its prior 24.03 buy point. For an early entry opportunity, look for Teck to break above the down-sloping trend line from its early May high.
The stock chart for Rio Tinto, a U.K.-based diversified miner of copper, iron ore, gold, aluminum, uranium, diamonds and lithium, looks strikingly similar to that of Teck.
RIO stock also just found support at its 10-week line. But that came just below its prior 88.38 cup-with-handle buy point. Investors can use a break above the down-sloping trend line from its May 10 high as an early entry.
A weekly chart shows that Rio has carved out a flat 5-week base with a 96.07 buy point.
BHP, the world’s largest mining company, has a strong 95 IBD Composite Rating, but it’s the weakest of the bunch among this weekend’s focus stocks. Scale may not be an asset. While BHP is a major copper producer, it has the most work to do in transitioning its portfolio from base metals.
BHP stock’s brief foray past an 81.92 cup-base buy point on May 10 — after many miners — quickly failed as commodity prices consolidated. But it did manage to find support at its 10-week line and perk above its 21-day line this week.
BHP stock now has a flat base with an 82.17 buy pont.
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