The Rio Tinto share price (LSE: RIO) has suffered heavy losses this week as a slowdown in China and falling commodity prices batter miners. Yesterday’s 2.74% drop was the fourth straight day of declines for the Anglo-Australian metals and mining behemoth.
Three weeks ago, Rio Tinto reported stellar first-half earnings and a monster dividend payment following a jump in metals prices. However, in the last two weeks, metals have corrected sharply lower. The copper price has dropped 6% this week alone and is now more than 17% below this year’s high. Furthermore, Iron ore is down over 30% since late July. And last week’s disappointing factory output data from China has increased the downwards pressure on metals, further cooling the previously red-hot rallies. But has RIO now done enough on the downside to make it an attractive opportunity?
RIO Technical Outlook
The daily chart shows the Rio Tinto share price is deep into oversold territory. The relative Strength Index (RSI) reading of 27.83 is the lowest since October 2020. Additionally, the Moving Average Convergence Divergence Indicator (MACD) is equally depressed. Not to mention, RIO is more than 10% below the 200-day moving average at 5,807p.
However, as depressing as that reads, the price action is so bad that it may actually be positive. And encouragingly, so far, RIO is finding some support at November 5,075p high. This may be an indication of bargain hunting emerging at this lower valuation. And if RIO climbs above the March 5,274p low, it may start to gather pace on the upside.
However, one of the first things I was taught as a junior trader was never to catch a falling knife. And on that basis, the best policy may be to wait for the price to stabilise. Despite the recent collapse, Rio Tinto is well-placed to capitalise on increasing demand for base metals in the years ahead. However, a better entry point may arise.
Rio Tinto Share Price Chart
For more market insights, follow Elliott on Twitter.