The BHP share price surged by more than 2.9% on Tuesday as investors reacted to the surging commodity prices. The stock is trading at 2,400p, which is the highest it has been since July 2011. The shares have jumped by more than 65% from its lowest level in November last year.
What happened: BHP is a giant mining company whose shares are dual-listed in London and Australia. The company deals with a variety of commodities like iron ore, copper, and nickel, among others. Therefore, the company does well when the prices of these commodities rise as well. This is what is happening.
Today, the price of iron ore rose by 10% to a record high of $226 per ton, as demand from China continued to rise. Also, the ongoing tensions between Australia and China has led many to worry about supply shortages. In a note last week, yantin Zhou of Wood MacKenzie said:
“China is unlikely to ban imports of Australian commodities that they rely heavily on, as it would impact the domestic economy.”
Similarly, copper prices rose to a record, as shown on the chart below. In addition, the closely-watched Bloomberg Commodity Index (BCOM) rose by more than 0.40% today. Therefore, analysts expect that BHP and other commodity miners like Rio Tinto and Glencore will continue doing well as the commodity supercycle continues.
Copper price chart
BHP share price analysis
Turning to the daily chart, we see that the BHP stock has been in a strong upward trend after it dropped to 1,992p earlier this year. The share price has managed to move above the previous YTD high of 2,415p, which it reached a few months ago. It has also moved above the short and longer term moving averages. Further, it remains above the ascending trendline that connects the lowest level since November.
Therefore, in my view, the shares will continue rising so long as it is above the 25-day and 15-day moving average and the ascending trendline. A drop below either of the two will invalidate this trend.
Please don’t consider this investment advice. Views expressed here are those of the writer and the writer and InvestingCube will not be held liable for any losses.