bhp billiton further potential up towards key long term resistance zone 1837602016

“Infrastructure upgrading” will one of the next key strategic stock picking theme going forward in the next three to six months.  The two main catalysts that will drive this theme are developed countries’ shift towards using fiscal policy tools to drive the next stage of economic growth as their respective central banks have started to ease down on quantitative easing (QE) programmes (U.S. Fed) or reluctant to extend its QE programme (ECB) and even change of liquidity management (BOJ’s yield curve targeting that has replaced the prior absolute targeted amount of JBGs that are required to be purchase under BOJ’s QQE programme).

Secondly, one of campaign pledges made by U.S. President-elect Donald Trump is to ramp up infrastructure spending to around U.S $550 billion. Given that both the House and Senate are now in control by the Republicans, Trump’s infrastructure spending plans are likely to be able to pass without much objections except that an increase in fiscal spending from Trump’s fiscal policy plans that include massive tax cuts that would amount to around U.S.$5 trillion in the next 10 years are required to be funded by some cutbacks elsewhere.

Nevertheless, a positive feedback loop at least in the medium-term (1 to 3 weeks) has been set in place for base metal commodities and cement related stocks to benefit an upcoming global change in expansionary policy from the fiscal side via “Infrastructure upgrading”.  For this upcoming week, we will feature a base metal commodities related stock, BHP Billiton

BHP Billiton (ASX: BHP) 

(Click to enlarge chart)

Key elements

• Medium-term uptrend as indicated by the ascending trendline in place since 20 January 2016 remains intact with key pivotal support at 21.00.
• Upside momentum of price action remains positive as indicated by the RSI oscillator coupled with an increasing volume.
• The significant resistance zone stands at 28.92/31.67 which is defined by the long-term descending trendline in place since 11 April 2011 and a Fibonacci cluster.

Conclusion

As long as the 21.00 medium-term pivotal support holds, BHP Billiton is likely to see a further potential up move to target 28.92 follow by 31.67 next.

On the other hand, failure to hold above the 21.00 pivotal support may invalidate the preferred bullish bias to open up scope for a further decline towards the next support at 17.45.

Charts are from eSignal as at Thurs, 10 Nov 2016

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