Reasons to continue to avoid iron ore stocks

Angela Mangan

QMG Pty Ltd

Reasons to continue to avoid iron ore stocks. Although these stocks are in technically oversold territory on a momentum indicator basis, by indicators such as the RSI, these are not reversal/turning point indicators i.e. they do not identify WHEN an oversold situation will correct itself via a share price rally. The RSI is a useful screening indicator (for oversold situations), but should in my view never be used in isolation, as it provides no indication of WHEN a turnaround in a share price will occur e.g. iron ore share prices would initially have been flagged as oversold on a RSI basis in June 2014, and are now trading at massively lower prices than in June, and have subsequently become even more oversold. No sign of base forming emerging on iron ore stocks, and that is the requirement to generate technical buy signals. A turning point / reversal indicator is more effective in identifying the time to buy, than oversold momentum indicators. Iron ore stocks will become a buy at some point, but in my view the time is not now.


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Angela Mangan
Angela Mangan
Technical Analyst
QMG Pty Ltd

Angela has over 30 years experience in the technical analysis field. She provides technical analysis coverage of major Australian and global stocks / key markets, including provision of a bespoke technical service to wholesale clients.

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