The Anglo American share price has staged a major comeback after it dropped to 2,680p last week. The shares have jumped by more than 9% and are trading at 2,925p but are about 16% below the highest level this year. This values the company at more than 39 million pounds.
What happened: The Anglo American stock has done relatively well this year helped by the strong commodity prices and the Thungela Resources spin-off. This spinoff helped the company lower its exposure to coal, an industry that has fallen out of favour among investors. Indeed, Thungela’s shares have underperformed after it started trading in London.
Anglo American has benefited from the ongoing strength of commodities. Diamonds prices have risen, helped by the rising demand. Copper and iron ore prices have also rebounded after retreating in the past few weeks. Most importantly, the stock will be in the spotlight after Joe Biden reached a deal on infrastructure with a bipartisan group of senators. This deal means that investors expect more demand for nickel, copper, steel, and aluminium. So, what next for the AAL share price?
The daily chart shows that the AAL share price has risen by more than 185% from its lowest level last year helped by the strong demand from China. This demand helped push the prices of all commodities sharply higher. Recently, though, the stock has dropped as investors price in slower demand from China. It dropped from the year-to-date high of 3,513p to 2,673p.
A closer look at the chart shows that the stock is trading at the 23.6% Fibonacci retracement level. It is also struggling to move above the 100-day moving average. Also, the shares have formed a head and shoulders pattern, which is usually a bearish signal. Therefore, I suspect that the shares will resume the downward trend in the coming weeks as bears target the next support at the 38.2% retracement at 2,560p. However, a move above 3,200p will invalidate this thesis.
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