Bottom line
This sector has created a (potentially) bullish chart
pattern.
Prices have been falling since 2011 in both absolute and
relative terms and have now the possibility to start moving higher on
both terms (absolute and relative).
Another brief correction (ie not a new low) is possible
before the index starts its uptrend but a weekly close above the white line in
Chart1 would increase significantly the probability of a more sustained move higher.
A break of the lower boundary on the contrary would be very
bearish and probably accelerate the speed of the correction.
Analysis
Chart1 shows a potential falling wedge formation, confirmed
by the MACD oscillator.
The MACD is showing strong bullish divergence and has also
broken its resistance line on the upside, a move that more often than not is a
good warning that the same is going to happen to price
Chart 2 shows the relative performance vs the DJ 600: we
have another bullish divergence and a retest of the 2009 low. Basically the
sector is as hated today as it was in the midst of the 07-09 bear market.
Chart1 - DJ600 Basic
Resources
Chart2 - DJ600 Basic Resources
RELATIVE CHART (ie relative to broad DJ600)
