Fortescue Metals Group’s Share Price Turning Around

At the time of writing, shares of Fortescue Metals Group Ltd [ASX:FMG] are down by 2.83%, to $3.945 per share.

Why did Fortescue Metals Group shares do this?

Fortescue Metals Group is considered a blue chip company and tends to move with the market. That makes sense. The ASX 200 Index is currently trading flat, down by 0.3 points to 5805.3 points:commsec graph of fortescue metals

Source: CommSec

The ASX 200 bounced off the 5,600 zone, as we warned it would last week. The market looks in the process of bottoming around this zone; although we may see a double bottom into the US election on 6 November. That said, the market really needs to monthly close above 6,000 points to resume the rally. The end of a correction should spell good news for Fortescue Metals Group. The company has held up relatively well during the latest market turmoil:commsec graph of fortescue metals

Source: CommSec

Fortescue Metals Group has consolidated since early September ― the share price has been stuck in a 40-cent range. We’re seeing Fortescue Metals Group trying to break through resistance at $4 per share. But, at this stage, the risk-reward favours the short side around these prices ― the trend is your friend and the market could still make a double bottom.

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What now for Fortescue Metals Group?

That said, if Fortescue Metals Group closes above the $4 level on a monthly basis and reverses trend, we could see a swift short-covering rally to $5. For the share price to take off though, we want to see the overall market bounce to signal the correction is over.

Let’s take a look at the iron ore price ― the main contributor to Fortescue Metals Group’s earnings:trading view iron ore

Source: tradingview.com

The iron ore price is taking off, after trading sideways for months. It appears to be moving towards the US$76–78 per tonne level. That’s possibly why FMG’s share price is holding up, given the reasonably weak market environment. In that case, given iron ore is the main source of Fortescue Metals Group’s revenue, a rising iron ore price is positive for the company.

The share price could explode higher soon…

The bottom line: Fortescue Metals Group’s future is mainly dependent on the overall market today, rather than the iron ore price. In that case, pay close attention to the share price: we could see a short covering rally with the iron ore price, if the market starts to reverse higher.

Regards, 

Jason Stevenson,
Resources Analyst, Markets & Money

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Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:


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