BHP Share Price Pares losses As Inflation Fears Recede

Summary:

The BHP share price may finally be finding its feet again. Shares in the U.K listed miner have stabilized after the recent -15% rout.

The BHP share price may finally be finding its feet again. Shares in the U.K listed miner have stabilized after the recent -15% rout.

At the end of last month, with the stock trading at 2,208p, I suggested it would be just a matter of time before the price hit a new all-time high.

No sooner than 10 days later, the BHP share price set a new record of 2,418.5p, marginally higher than the previous 2,408.5p.

However, the excitement was short-lived.

Since the 10th of the month, the share price performance has struggled under the weight of several factors.

Initially, inflation concerns in the US dented commodity sector confidence. However, Federal Reserve speakers were quick to dispel any notions of a tightening circle any time soon.

However, at this stage, the stock had had already turned lower.

Next came China’s commitment to pop the growing commodity price bubble. The country, widely recognized as the world’s factory, relies heavily on raw materials for its manufacturing sector. High import prices would eventually prove to be a drag on their economic recovery.

For a brief moment, markets responded, and base metals turned lower on the news.

This increased the downside price momentum in BHP.

By Wednesday of this week, the stock was trading at 2,081p, having retreated -15% from the high earlier in the month.

As inflation fears started to recede, base metals prices have reacted positively and are again pointing higher.

This should not only stem the losses for BHP but potentially set the stage for a rebound.

Additionally, the restrictive measures from China have, so far, been aimed at curbing excessive retail speculation in commodity markets. In isolation, this is unlikely to have a material effect on prices.

BHP Share Price Outlook

The daily chart shows us that the BHP share price has found support at an ascending trend line in place from December, at 2,045p.

We can also see that the MACD momentum indicator is starting to turn higher. This may indicates that the selling momentum is fading.

However, the price should run into resistance at soon. Both the 50 and 100 DMA’s are situated at 2,169.8p.

I would be bullish on the BHP share price only if it closes above this threshold. If that happens, I see a good chance of the stock continuing higher.

Nonetheless, two important averages at the same price indicate that this will be a strong area of resistance. A rejection at this level could lead to a pullback. If the price trades below the supportive trend line, this would cancel my bullish view.