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BHP which was fondly known as the ‘Big Australian’ is now large by any world measure and is quoted on numerous indices and bourses worldwide.
In recent weeks and months it has pleased many Fundies as it has quietly climbed some 50% since January this year. Maybe this has not been spectacular as some of the mining rookies but impressive by any standards. For numerous personal investors many of whom use margin lending this has translated into a 200% gain! Now that is exciting!
Many Fundies are unable to invest in the mining sector specifically as they may be limited to the top 50 or top 100 stocks. But BHP and RIO are top 50 stocks and are thus a proxy to the mining boom.
As BHP is of interest to investors far and wide, where it may head is of deep interest so let’s look at where it has been and where it might be going:
click chart for more detail
I find an Elliott line chart is as simple and reliable a picture as you can get. We can see three wave five projections and we know from experience that the probability of the first wave five being reached is high, but with the probability diminishing for the second and third wave five.
As we know the market moves in waves – they move up, they move down and move up again. So in all this we should consider the probability of a pullback. But we also know is that it is possible that wave three may in fact reach the first wave five before a pullback.
You might think that all this is too complicated. Well not really. What Elliott does is project pullbacks and extensions. And what is important to know is that a stock has more upside. Roughly when this may happen and at what price level – that is all we need to know.
From the above chart we can see that BHP is likely to climb to $38 with a chance of $42 by this year’s end. What are the chances? Would I bet (in a manner of speaking) on it? Most definitely. But if I was a new buyer I would await a pullback. That is the safest time to buy.
Enjoy the ride!
Tom Scollon
Chief Analyst
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