The Big Boys, page-449

Hi Vindin,

Yes Madamswer is unquestionably one of the best stock analysts on Hotcopper. I have to disagree with him on this one as I think Rio has a lot further to fall. China is not in a good place right now, and we really are only at the start of the commodity capitulation IMO. I/O is particularly susceptible to further falls as the producers are still all churning at record levels to fight each other for market share. Of course this will eventually play into the hands of BHP, RIO and VALE, but I think this is still quite some way off. I've said it a few times before, but I'll only be buying I/O stocks is when Twiggy Forrest is in the dole queue.

Other commodity sectors such as coal have been through this process and are now slowly grinding lower and lower, after the big falls are exhausted. I think this is what IO has in store for the next few years, while the juniors continue to churn more and more at lower and lower costs to hang on for dear life, and the big boys play the game, knowing they will pick through the carcases at the end. I'm forecasting I/O to hit $30 (give or take), at which point I think the stone will be bled dry.

Oil has a different dynamic. Shale technology changed the industry forever. The shalers can switch the taps on and off very quickly, so I expect we will see big rebound soon as the EIA reports continue to show falling numbers. Long term, I don't think it's over for oil either. Saudi's, much like the big IO producers, should continue to pump in order to inflict mass defaults on the shalers. The problem for the Saudi's is this will only just be temporary. When prices go back up, money will flow back into the sector and they are back to square one...with a significant dent in their balance sheet.

Buying RIO for a ST trade is a completely different question, and I think a swing long is probably very close to being in play here. From a RIO chart perspective, I'll leave that for others to comment, I'm just expecting a general commodity rally very soon. I'm not sure if you are considering this for an investment or a trade, but I personally wouldn't consider investing just yet. In fact I'll be looking to heavily short any significant deadcat bounce from here.