Glencore share price has been in a strong upward momentum. It is trading at 305p, which is 180% above last year’s low of 109p. It has risen by more than 19% in the past 30 days, becoming the fourth-best performer in the FTSE 100 after IAG, Antofagasta, and NatWest.
What happened: Glencore is a major commodity mining group that specializes in copper, cobalt, nickel, zinc, and coal. The company is also a leading recycler and marketer of commodities.
Therefore, it has benefited substantially from the ongoing rally of commodities because of the demand from China and supply constraints. Indeed, the Bloomberg Commodity Index (BCOM) has jumped by more than 50% since March last year.
Glencore share price has also risen after its recent strong earnings. The company’s revenue was strong while write-downs helped push its annual loss to $1.9 billion. As a result, the firm reinstated its dividend as it reduced its debt by 10%. However, the company faces significant risks going forward. For one, while analysts expect that this commodity supercycle will continue, there are risks that rising supply will pull their prices down. This is riskier for Glencore since a 10% decline in commodity prices leads to a 43% decline in earnings. Also, the firm faces several corruption cases and its coal business is also struggling.
The daily chart shows that the Glencore share price has been in a strong upward rally recently, Along the way, it has formed an Elliot Wave pattern and is currently in the fifth section of the wave. The price is also about 18% below the important resistance level at 356p. Therefore, in my view, the Glencore stock price will likely retest this resistance and then pullback in line with the correction phase of the wave.
