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This article appeared in the April 2012 ASX Investor Update email newsletter. To subscribe to this newsletter please register with the MyASX section or visit the About MyASX page for past editions and more details.

What the charts say for BHP, Rio Tinto, Woodside and Newcrest.

Photo of Regina Meani By Regina Meani, author

As waves of uncertainty coming from overseas and locally continue to buffet the Australian sharemarket, we look at the big four blue-chip resource companies and how they may fare in the coming months.

(Editor's note: The new ASX Charting Video shows how to make the most of the ASX website's charting tool.)

1. BHP Billiton

BHP Billiton - 2007 to 2012

BHP Billiton candlestick chart - 2007 to 2012

BHP is the world's leading diversified resources company and is one of the largest producers of major commodities: aluminium, copper, energy coal, iron ore, manganese, metallurgical coal, nickel, silver, titanium minerals and uranium, with substantial interests in oil and gas.

The long-term upward path for BHP looks set to continue but there is room for more volatility in the trend as it progresses. In 2007-08 the share price began a broad movement across the trend, which incorporated significant downswings.

As the volatility phase continues its influence, the price is experiencing swings in a range between $33 and $38.50, and we expect this to continue over the short term, providing trading opportunities. But the trader and investor should be aware that the $33-34 area represents key support within the upward trend. Although a break down from this level is not anticipated at present, a failure from this area could see the volatility range broaden to incorporate lower support in the $29-31 range, without endangering the broader upward path.

A breakaway through $38.50 would signal the potential for the price to recover towards $42 and then $45 in a test of resistance, with the final barrier within the long-term path at the peak zone around $50.

2. Rio Tinto

Rio Tinto - 2007 to 2012

Rio Tinto candlestick chart - 2007 to 2012

Rio Tinto is listed on the UK and Australian exchanges. The company's major assets are in Australia and North America but it also operates in Europe, South America, Asia and Africa, running open-pit and underground mines, mills, refineries and smelters, as well as research and service facilities. Its core product groups are aluminium, copper, diamonds, minerals, and energy and iron ore.

During the 2008 market downturn, Rio experienced a more threatening and dangerous fall in price than BHP, but that formed what may prove to be the basis for a powerful momentum move. The outcome of the phase remains uncertain as the price hovers above a critical support zone in the $58-62 range, with the lower limits around $52.

As the price oscillates above support it faces resistance around $67 and then more importantly around $72, with the downward trend from the peak roughly in the $78-80 zone. The odds are in favour of an upward break from the phase, but this has not yet been signalled. When the breakaway through this area is triggered it would unleash the momentum for the upside, powering the price significantly higher.

3. Woodside Petroleum

Woodside Petroleum - 2007 to 2012

Woodside Petroleum candlestick chart - 2007 to 2012

A key player in the supply of energy to the Asia/Pacific region, Woodside is one of the world's largest producers of liquefied natural gas and maintains a non-LNG portfolio of natural gas, liquefied petroleum gas, condensate and oil for customers in Australia and overseas. It is a sought-after provider of cleaner energy.

The upward path from the 1970s halted abruptly in 2008 when the price topped and swung into decline, falling from close to $70 down into a spike low at $26.50 within six months. Recovering strongly into 2009, the price was buffered by resistance from the top area around $50 which, continuing its influence, restricted the price again in 2011.

After falling heavily in early 2011, the price reached support levels at $30 later that year. At that time the price fell back to support, bounced and began a strong upward move.

If a similar performance ensues, the price may continue to churn between $33.50 and $39, with a rise above $40 required to clear the barrier to higher prices. Lower support aligns in the $30-31 range. The danger, while the price churns at the lower end of the phase, would be a penetration of critical support located between $28.50 and $29.

4. Newcrest Mining

Newcrest Mining - 2007 to 2012

Newcrest Mining candlestick chart - 2007 to 2012

Newcrest is a global top-10 gold company and ranks as one of the world's lowest-cost producers.

Its asset portfolio includes eight operating mines: Cadia Valley operations, comprising Cadia Hill and Ridgeway (near Orange, NSW); Telfer open pit and underground (Pilbara, Western Australia); Gosowong (Indonesia), Lihir (PNG), Hidden Valley (PNG) and Bonikro (West Africa).

A large basing pattern formed during the 1980s and 1990s and powered a strongly rising trend until 2008, when the price peaked along with the market and fell sharply from $40 to about $16. It rebounded quickly to retest its heights in 2009 and forged higher into 2010 and 2011. The price reached new highs around $43 before momentum divergence produced a rollover and decline.

The market downturn has continued to exert its influence on the price, with a steeper fall during February and March, breaking down through the $30 support. The price has reached support at $27-28 with a preliminary bounce. An early signal for a reversal would be a rise above $30 to face higher barriers set at $32 and then $35-37.

The rebound is likely to be equally as steep as the decline, but before this occurs there remains the danger for a final downturn, which would be triggered on a break beneath $27 with a risk towards the critical $20-22 zone. Therefore, it is important for the trader and investor to focus on the key levels at $27 and $30 over the short term.

When the upward path resumes, the price would regain the potential to surpass its recent peak zone and move significantly higher.

About the author

Regina Meani is a freelance, independent consultant and authorised representative of BBY Limited. Her website is Your Technical Analyst.

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