Analysis requested by member of BG Trading Group

Sentiment: Bearish

Who doesn’t love trading the forever bullish iron ore giant Fortescue?

Key Elements used in this Analysis:

  1. FMG has been bullish since March, with share price growing 120% since March and 379% since December 2018.
  2. Multiples Higher lows and Higher highs, enforcing the stock has been into a bullish trend.
  3. We noticed a bearish intersection of SP followed by the another bearish EMA intersection confirming a short term down trend in early September. That leaves any entry after this point, completely unprotected as indicated by the top red circle in the both chart, therefore failing on our entry test for a long position as per this KPI. Ideally, we would like to see sp testing SMA but not taking a bearish crossing in order to trigger an entry.
  4. We also noticed that as the sp goes down, the volumes increases, which means the direction of the short term trend is gaining momentum.
  5. Two RED CIRCLES = PERFECT RECIPE FOR DESASTER if you are holding a long position.
  6. There is no SP consolidation at this stage making it a falling knife.
  7. There is no reversal indicador at this stage making it a falling knife.
  8. Heiken Ashi Chart confirms the intensity of the trend.
  9. The bottom can be any level and we simply don’t know where the sp could reach, we are also learned over the years, not to attempt picking a bottom as it can be very very dangerous.

Overall we would NOT be buying FMG just yet until we have clear signs of sp consolidation or/and clear signs of trend reversal. If we were to gamble and trying to pick the bottom, a stop loss is a MUST.