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USHAMART: Daily Accumulation Breakout1. The Macro Perspective: The Multi-Month Accumulation Base
I am taking a LONG bias on Usha Martin Limited (USHAMART) on the daily (1D) timeframe.
When analyzing pure market structure on an industrial stock, prolonged consolidation periods are necessary to digest prior gains and build kinetic energy. Looking at the chart, following its previous rally, USHAMART entered a massive horizontal digestion cycle over several months. The stock formed a heavy accumulation block firmly bounded by an overhead resistance ceiling at 485.55. This sideways consolidation effectively absorbed profit-taking and allowed institutional buyers to quietly accumulate shares. Fundamentally, this technical momentum aligns perfectly with the company's recent stellar Q4 FY25-26 financial performance. Usha Martin reported a consolidated net profit of ₹148.03 crore, marking a 37.48% quarter-on-quarter increase and a 46.70% year-on-year growth. Furthermore, revenue stood at ₹979.26 crore, reflecting a 9.28% YoY growth.
2. The Educational Setup: Horizontal Boundary Defense
To understand the technical validity behind this macro launch, look closely at how the price structure interacted with its core boundaries prior to breaking out:
The 485.55 Resistance Ceiling: The definitive line in the sand for a bullish continuation was the solid black horizontal resistance line drawn at 485.55. As the price tested this line multiple times since the start of the year, it established a clear supply zone that systematically rejected upward expansion until now.
The Dynamic Cushion: During the consolidation block, notice how the deep corrective pullbacks in early 2026 were heavily defended. Institutional buyers repeatedly stepped in, eventually carving out a series of higher lows that allowed the rising daily moving averages to catch up and act as a dynamic launchpad. This squeezed volatility directly beneath the breakout zone.
3. Current Price Action: Breakout and Volatility Expansion
Look at the most recent daily candle on the far right of the chart. The structural pressure cooker has officially exploded. Institutional buyers have stepped in with undeniable conviction, printing a massive, full-bodied green expansion candle that has vertically surged to close at 510.45 (+6.17%). This explosive thrust has decisively obliterated the 485.55 multi-month ceiling on a noticeable volume expansion. The stock has officially transitioned out of low-volatility accumulation and into a highly explosive markup trend into blue-sky territory.
4. The Trade Plan: Entries, Targets, and Risk Management
Entry Strategy: Momentum is exceptionally strong with the stock trading vertically out in the open. Chasing an extended daily breakout candle completely outside the upper Bollinger Band carries a minor risk of a short-term, lower-timeframe mean-reversion pullback. The highest-probability, lowest-risk entry strategy involves waiting for the initial vertical excitement to cool off. Look to scale into long positions or place limit orders to catch a potential pullback to perfectly retest the broken 480.00 to 490.00 prior resistance zone. Letting old historical resistance prove itself as a concrete new support floor provides an unmatched risk-to-reward ratio.
Take Profit (Targets): By taking the absolute depth of the horizontal range (roughly 90 points from the structural floor near 395.00 up to the 485.55 ceiling) and projecting it upward from the breakout point, our primary structural target sits comfortably in the 570.00 to 580.00 zone over the coming weeks.
Invalidation (Stop Loss): An explosive breakout thesis is completely invalidated if the price fails to hold its newly claimed structural floor and collapses back inside the core of the base boundaries. A hard stop loss should be placed safely below the daily 20 SMA cushion and recent swing lows, specifically around the 450.00 to 460.00 level. A definitive daily close completely back below 450.00 would act as a severe warning sign of a failed breakout and a major bull trap.
5. Time Horizon:
Because this technical setup is built on a 1-Day chart capturing a clear structural phase transition and an all-time high horizontal breakout, this is a high-alpha swing trade designed to capture a rapid momentum markup phase over the coming weeks. Let the trend run! 
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$X: Generational Setup? The Road to $500 Begins🏗️ 🏗️ 🏗️
That monthly chart for United States Steel Corporation #X shows a massive, decades-long "W" or double-bottom pattern that technical traders often use to project long-term targets.
As of February 11, 2026, the stock is trading at $54.84.
While the Log Projection of $500 is an incredibly ambitious long-term "moon shot" based on that massive base, the current market reality and technical setup tell a story of "measured optimism."
Bullish Drivers: Analysts point to a decade of underinvestment in resources, the massive metal requirements for the global energy transition (EVs, power grids), and continued infrastructure spending.
The Steel Angle: US domestic steel prices are currently supported by heavy tariff protections, keeping them significantly higher than global export prices.
Contrarian View: Some institutions, like the World Bank, are more cautious, predicting a potential surplus in some commodities (like oil) that could dampen the broader "cycle" narrative.
Near-Term: Wall Street analysts have a median target of $55.00, meaning it is currently "fairly valued" by traditional standards.
The "W" Pattern Projection: If the breakout above $55 holds, the next major "linear" technical target based on the depth of that multi-year base typically sits in the $90.00 – $100.00 range.
The $500 Log Projection: This would require a "perfect storm"—a complete global supply-side failure combined with hyper-demand for US-made steel. While technically "projectable" on a log scale over many years, it remains a high-conviction "outlier" idea. X
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MAHASTEEL (India) - Steel Manufacturer on a Parabolic RunMahamaya Steel has been an absolute standout in the Indian industrial sector, delivering a staggering return of roughly 330% over the last year. The company operates out of Raipur and is a key manufacturer of heavy steel structures like joists, channels, and beams used in major infrastructure and railway projects.
On the fundamental side, the momentum has been backed by a significant jump in profitability, with recent quarterly net profits climbing over 700% compared to the previous year. The company is benefiting from the broad infrastructure push in India, supplying everything from power plants to metro rail projects. The sharp pullback we’ve seen since the start of January looks like a combination of the market digesting these massive gains and some standard profit-taking after the stock hit record highs near the 1,000 INR mark.
Looking at the chart, the price action has finally moved back into what would be considered a much more reasonable value area. After being way overextended, the stock has dropped back to test the 50-day SMA and would be good to see it move back up above here. The RSI has completely reset from extreme overbought territory down to a neutral 45, and the MACD is starting to show the selling pressure might be bottoming out as the histogram bars shorten. It's essentially a high-flyer taking a much-needed breather at a logical support level.
If you think steel has a strong future in India as it goes through its own 21st century modernisation, similar to what China recently went through, then this might be one to keep an eye on.
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PLEASE NOTE: Nothing I post is trading advice. All investing involves risk, and past performance doesn’t predict future results. Trends can and do end. For 2026 , my goal is to try and post one new asset each day. Something outside the usual gold, silver, BTC, or big tech names. I like to find stocks worldwide showing steady trends with some good gains, a recent pullback, and signs of renewed strength. I don’t necessarily hold positions in these. They are simply companies I find interesting at the time of posting. I’ll often revisit them within a week to see how they went and share any updates. If you enjoy these posts, please BOOST and FOLLOW ME to discover more under-the-radar stocks and businesses from around the world. .................................................. Long 
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IO Weekly Technicals Review [2025/08]: IO Prices Extend UptrendSGX TSI Iron Ore CFR China (62% Fe Fines) Index Futures (“SGX IO Futures”) rose last week, closing USD 1.30/ton higher by 21/Feb (Fri).
SGX IO Futures opened at USD 105.95/ton on 17/Feb (Mon) and closed at USD 107.25/ton on 21/Feb (Fri).
Prices briefly touched a weekly high of USD 109.30/ton on 21/Feb (Fri) and a low of USD 104.20/ton on 17/Feb (Mon). It traded in a range of USD 5.10/ton during the week, which was wider than the prior week.
Prices crossed the pivot point of USD 106.85/ton and R1 point of USD 108.10/ton during the week, closing between the R1 point and the pivot point at USD 107.25/ton.
Volume peaked on 20/Feb (Thu) as investor sentiment improved amid signs of recovery in China’s property sector.
Iron Ore Fundamentals in Summary
Prices climbed to their highest levels in more than four months as steel consumption recovery signs brightened demand outlook in top consumer China, where stimulus hopes have revived.
Prices also surged as supply tightened after an Australian cyclone Zelia likely disrupted seven million tons of shipments.
BHP and Rio Tinto reported weaker earnings due to falling iron ore prices but emphasized their strong position in the energy transition, particularly through copper assets. While the recent price rally provides temporary relief for major miners like Rio Tinto, BHP, Fortescue, and Vale, they face significant short- and long-term risks.
China's port IO stockpiles dropped by 0.78 million tons (-0.52%) WoW to 149.18 million tons for the week ending 21/Feb as per MMI data.
Based on seasonality, SGX IO Futures Mar contract trades 16.33% below its last 5-year average (USD 129.66/ton).
Short-Term MA Sustains Bullishness amid Strong Industrial Outlook
Formation of a golden cross on 17/ Jan (Fri) triggered a rally in iron ore with prices rising 5.2% over three weeks before losing steam on 14/Feb. Following tentative signs of China's property sector recovery, iron ore prices regained upward momentum this week.
Prices Trend Upwards Amid Potential Long-term Moving Average Convergence
IO prices are trading well above 100-day & 200-day DMAs. The narrowing gap between the long-term moving averages suggests a high possibility of convergence which could further confirm the uptrend. Will prices revert towards longer-term averages or sustain their upward trajectory?
MACD Signals Weakening Bullish Momentum, RSI Cross Portends Bears Ahead
The MACD line is near the signal line suggesting weakening momentum of the bullish trend. Meanwhile, the RSI is at 57.59, at neutral levels as it hovers around the midpoint, with its RSI-based moving average at 59.65. RSI MA forming a death-cross portends bearishness ahead.
Volatility Steady & IO Prices Closed Below 61.8% Fibonacci Level Amid Uptrend
Volatility remained steady this week. Prices traded between the 61.8% Fibonacci level (USD 107.65/ton) and the 50% level (USD 105.40/ton), closing below the 61.8% Fibonacci level. Going forward, 61.8% Fibonacci level (USD 107.65/ton) may act as resistance, with 50.0% Fibonacci level (USD 105.40/ton) as support.
Buying Pressure Softened & IO Prices Trade Below Upper Bollinger Band Levels
Buying pressure softened during second half of last week based on A/D indicator. IO prices climbed from the basis band to the upper band during the week and closed within the range at USD 107.25.
China’s Two Sessions: A Key Catalyst for Iron Ore Market Swings?
China's Two Sessions (Lianghui) is an annual political gathering in China where key economic and industrial policies are set. This can significantly impact China linked assets including iron ore. Over the past four years (2021-2024), prices have shown a pattern of pre-meeting speculation-driven gains, followed by declines due to policy interventions or cautious economic targets. While 2021 and 2022 saw initial optimism fueling price spikes before corrections, 2023 and 2024 featured steady declines amid weak demand and rising inventories. This trend underscores China's policy direction as a key driver of iron ore market fluctuations.
Source: SGX
IO Futures Only Aggregate Exposure
Financial Institutions (FIs) and Managed Money participants are net long with 101.6k lots and 81.4k across all futures expiries. Physicals participants and Others are net short with 142.7k and 40.3k lots respectively across all futures expires. Managed Money increased net long positions, Physicals increased net short positions while FIs decreased net long positions last week. Overall futures open interest was 1,101,024 lots as of 14/Feb, while it was 984,935 lots as of 07/Feb.
Source: SGX
IO Futures & Options Aggregate Exposure
Financial Institutions (FIs) and Managed Money participants are net long with 102.3k lots and 90.9k across all futures and options expiries. Physicals participants and Others are net short with 145.8k and 47.4k lots respectively across all futures and options expires. Managed Money increased net long positions, Physicals increased net short positions while FIs decreased net long positions last week. Overall futures and options open interest was 1,370,376 lots as of 14/Feb, while it was 1,234,295 lots as of 07/Feb.
Source: SGX
Historical Futures Aggregate Exposure by Market Participants
Physical participants have switched from net long to net short over the past month. Managed Money participants have switched from net short to being net long in the last two weeks. Financial Institutions continue to hold net long positions since the second quarter of last year.
Source: SGX
Hypothetical Trade Setup
IO prices surged to a four-month high, driven by a brighter China steel demand outlook amid renewed stimulus hopes. This mirrors past trends where economic support hopes drove pre-session gains in 2021 & 2022. Current rally signals renewed optimism of stronger policy support from Two Sessions.
IO prices sustained uptrend last week save a pull back on Friday T+1 session. The MACD signals weakening bullishness while the RSI MA formed a death-cross portending bearishness ahead. IO prices rose from above 50% Fibonacci levels to close marginally below 61.8% levels indicating signaling bullishness.
Against this backdrop, this paper posits a long position in SGX Iron Ore Futures expiring on 28th March 2025 (FEFH2025) with an entry at USD 106.20/ton combined with a take profit level at USD 111.60/ton and a stop-loss at USD 101.70/ton resulting in a reward-to-risk ratio of 1.2x.
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
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IO Weekly Technicals Review [2025/06]: Correction Looms SGX TSI Iron Ore CFR China (62% Fe Fines) Index Futures (“SGX IO Futures”) rose last week, closing USD 2.25/ton higher by 07/Feb (Fri).
SGX IO Futures opened at USD 105.05/ton on 03/Feb (Mon) and closed at USD 107.30/ton on 07/Feb (Fri).
Prices briefly touched a weekly high of USD 107.50/ton on 07/Feb (Fri) and a low of USD 102.00/ton on 03/Feb (Mon). It traded in a range of USD 5.50/ton during the week, which was wider than the prior week.
Prices traded between the pivot point of USD 105.35 and S1 point of 103.85 throughout the week, crossing the R1 point of USD 107.20/ton on Fri and closing above it.
Volume peaked on 07/Jan (Fri) with volume increasing significantly compared to the previous week levels.
Iron Ore Fundamentals in Summary
Dalian iron ore futures reached a four-month high, posting strong weekly gains. The recovery was driven by steel mills resuming production, increased activity in the property sector, and rising Chinese equities after the Lunar New Year.
China filed a WTO complaint against new U.S. tariffs and urged dialogue. While trade tensions remain a concern, steel-related commodities continued to rise, with steelmaking ingredients and Shanghai Futures Exchange benchmarks posting strong gains.
Iron ore futures rebounded as a softer U.S. dollar (-0.4%) made commodities more affordable for global buyers. Additionally, Rio Tinto cleared ships from Western Australian ports due to cyclone threats, adding a risk premium to prices.
China's port IO stockpiles rose by 4.63 million tons (+3.19%) WoW to 149.91 million tons for the week ending 07/Feb per MMI data.
Based on seasonality, SGX IO Futures Mar contract trades 17.3% below its last 5-year average (USD 125.16/ton).
Short-Term Moving Averages Signal Bullish Trend, But Correction Looms
Formation of a golden cross on 17/ Jan (Fri) followed by upward trend for three weeks indicating that the bullishness may sustain in the near term. Prices are trading above both the short-term moving averages.
Long-Term Averages Indicate Convergence of Moving Averages
IO prices crossed and closed significantly above the 200-day DMA. Signaling a strengthening bullish trend as prices beats the 200-day DMA, with a probability of convergence between long-term moving averages.
MACD Signals Bullish Momentum; RSI Inching Towards Overbought Zone
The MACD signals a positive momentum starting from 14/Jan with growing bullishness observed last week. Meanwhile, the RSI is at 65.08, is inching towards the overbought zone and it hovers above the midpoint, with its RSI-based moving average at 60.97.
Volatility Rose, Price Closed Above 50% Fibonacci Level
Volatility gained upward momentum late in the week. Prices traded between the 38.2% Fibonacci level (USD 103.10/ton) and the 61.8% level (USD 107.62/ton), closing below the 61.8% Fibonacci level. Going forward, 61.8% Fibonacci level (USD 107.62/ton) may act as resistance, with 50.0% Fibonacci level (USD 105.36/ton) as support.
Buying Pressure Intensified, Price Trading Near the Upper-Bollinger Bands
Buying pressure has intensified in the later part of the week according to the Accumulation/Distribution (A/D) indicator. The price is trading between the upper-volume node and basis-volume node, closing the week near the upper-volume node.
IO Prices Rise Towards CNY & Then Decline Thereafter
Between 2021 & 2024, SGX IO futures prices have risen leading up to the Chinese New Year before tapering off ten trading days after the holiday. Prices declined before & after CNY holidays only in 2024 while prices continued to rise even after CNY before falling sharply in 2021 & 2022.
A similar trend was observed in the ten-day period leading up to CNY 2025.
IO Futures Only Aggregate Exposure
Financial Institutions (FIs) are net long with 136.6k lots across all futures expiries. Managed Money participants, Physicals participants and Others are net short with 15.5k, 103.5k and 17.3k lots respectively across all futures expires. Managed Money decreased net short positions, Physicals increased net short positions while FIs decreased net long positions last week. Overall futures open interest was 1,179,418 lots as of 31/Jan stood at lots (-3.5%) while it was 1,222,981 lots as of 24/Jan.
Source: SGX
IO Futures & Options Aggregate Exposure
Financial Institutions (FIs) are net long with 133.2k lots across all futures & options expiries. Managed Money participants, Physicals participants and Others are net short with 7.0k, 106.9k and 19.2k lots respectively across all futures and options expires. Managed Money decreased net short positions, Physicals increased net short positions while FIs decreased net long positions last week. Overall futures and options open interest was 1,421,263 as of 31/Jan stood at lots (-5.2%) while it was 1,499,318 lots as of 24/Jan.
Source: SGX
Historical Futures Aggregate Exposure by Market Participants
Physical participants have switched from net long to net short over the last three weeks. Managed Money participants have maintained net short positions for the past month. Financial Institutions continue to hold net long positions since the second quarter of this year.
Source: SGX
Hypothetical Trade Setup
Prices are currently trading above short-term moving averages and significantly above both long-term moving averages, hovering near the upper Bollinger Band, which suggests potential resistance at these levels. Historical trends indicate a pattern of price declines in the last three days of the 10-day period following the Chinese Lunar New Year, a movement that could potentially repeat this year. While managed money participants have reduced their short positions over the past two weeks, signaling a more optimistic outlook, we take a contrarian view and recommend a short position strategy this week, anticipating a potential price correction from current levels.
The hypothetical trade setup involves entering a short position at USD 107.6/ton with a take profit level at USD 104.3/ton combined with a stop loss at USD 109.0/ton resulting in a 2.35x reward-to-risk ratio.
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
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IO Weekly Technicals Review [2024/50]: Stimulus Rally FizzlesSGX TSI Iron Ore CFR China (62% Fe Fines) Index Futures (“SGX IO Futures”) expiring in Jan 2025 rose last week closing USD 1.95/ton higher by Friday.
SGX IO Futures opened at USD 102.85/ton on 09/Dec (Mon) and closed at USD 104.80/ton on 13/Dec (Fri).
Prices briefly touched a weekly high of USD 107.30/ton on 10/Dec (Tuesday) and a low of USD 102.55/ton on 09/Dec (Mon). It traded in a range of USD 4.75/ton during the week which was wider than the prior week.
Prices tested the R2 pivot point on 10/Dec (Tue) but failed to pass the level. Price maintained support above the R1 pivot point of 104.75 till the end of the week.
Volume peaked on 10/Dec (Tue) driven by the expanded stimulus announcement in China.
SGX Iron Ore Futures Fundamentals in Summary
IO started the week on a positive note with prices rallying 3% on 09/Dec (Mon) driven by news of expanded stimulus expected to arrive from the Central Economic Work Conference in China.
Despite the rally on 09/Dec (Mon), economic releases on the day showed CPI declining 0.6% MoM (-0.4% E and -0.3% P) during November. Annual CPI also decelerated to 0.2% (0.5% E and 0.3% P) suggesting that the economy continues to be plagued by low domestic consumption.
On 13/Dec (Fri), further economic data from China showed new loans decline 47% YoY to 580 billion yuan in November. Although the figure was 16% higher MoM, the annual decline shows low loan demand. Particularly, new housing and housing related loans remain subdued signaling a potential headwind to IO prices.
On 12/Dec (Thu), China officially announced it would increase the budget deficit, issue more debt, and loosen monetary policy to stimulate the economy and maintain a stable economic growth rate. There were also reports that Chinese policymakers were considering allowing the Yuan to weaken next year to combat punitive trade measures expected from the US.
Iron Ore imports to China fell 1.9% MoM in November to 101.862 million tons. The figure remains 3.9% higher YoY with the YTD figure 4.3% higher. Iron ore imports are expected to rebound in December.
Iron Ore portside inventories rose by 820k tons WoW to 146.66 million tons according to data from SMM. The increase was driven by a significant increase in port arrivals which offset a smaller increase in pickup volume. Maintenance may lead to a further buildup next week.
Based on seasonality, SGX IO Futures Jan contract trades 14.6% below its last 5-year average (USD 121.73/ton). Seasonal trends suggest a rally in the coming weeks.
Short-Term Moving Averages Signal Reversal of Bullish Trend
The 9-day moving average headed higher due to the rally at the start of last week. The price decline in the later part of the week led to a reversal as the 9-day MA is now curving downwards and approaching the 21-day moving average.
Long-Term Averages Signal Retest of 200-day MA
Price tested the 200-day moving average once again last week and managed to surpass it for some time before reversing and heading lower once again. Price remains well above the 100-day moving average which may provide support in case of a decline.
MACD Points to Fading Rally
Relative Strength Index (RSI) at 51.67 signals a neutral level. However, RSI has continued to trend lower since it signaled a crossover with its MA late last week. MACD is narrowing from its positive level and is close to marking a bearish crossover between the 12-day and 26-day MA which could signal a period of decline.
Volatility Rebounds from 1Y Low, Fibonacci 50% Signals Resistance
Volatility rebounded from its 1Y low last week to edge slightly higher to 19.19. Though, volatility still remains muted. Last week, prices retested the 50% Fibonacci level at USD 105.4/ton once more which continues to act as resistance.
Chart Signals Flat Top Pattern
The IO futures chart signals a flat top technical pattern with prices having tested the USD 107/ton level multiple times. The lower and of the range shows a widening channel which could suggest a lower low than previously seen in mid-November.
Hypothetical Trade Setup
Iron Ore prices surged early last week but gave up some gains by the end of the week. Prices retested its resistance levels once more but were rejected. Price also significantly lags the seasonal trend suggesting that the end-year seasonal rally may not materialize this year. Last week’s stimulus announcement failed to provide long-lasting momentum to the rally and prices are trending lower once more at the start of the week.
The declining flat top chart pattern suggests that prices could head lower this time around. This provides a favorable entry for a short position in Iron Ore. However, given significant support levels above that, it may be prudent to choose a slightly higher target.
We propose a hypothetical trade set up of selling SGX IO January Futures Contract at USD 105.00/ton with a stop at USD 108/ton and target at USD 100/ton resulting in reward-to-risk ratio of 1.67x. Each lot of SGX IO Futures Contract provides exposure to 100 tons of iron ore. For each lot, the hypothetical trade would result in gain of USD 500/lot ((105 – 100) x 100) while exposing the trade to a loss of USD 300/lot. This calculation excludes transaction costs comprising of clearing broker fees and exchange clearing fees. The SGX requires a minimum initial margin of USD 1,188/lot and a maintenance margin of USD 1,080/lot.
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
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Long
IO Weekly Technicals Review [2024/44]: Set For Large Move SGX TSI Iron Ore CFR China (62% Fe Fines) Index Futures (“SGX IO Futures”) expiring in December rose last week, up by USD 0.54/ton on Friday, though prices gave up some gains by the end of the week.
SGX IO Futures opened at USD 101.60/ton on 28/Oct (Mon) and closed at USD 102.14/ton on 01/Nov (Fri).
Prices briefly touched a weekly high of USD 104.60/ton on 29/Oct (Tue) and a low of USD 101.30/ton on 28/Oct (Mon). It traded in a range of USD 3.30/ton during the week, which was smaller than the prior week.
Prices traded just above the pivot point of USD 103.70/ton for most of the week before falling below it on Friday.
Volumes were noticeably lower in the later part of the week. Highest volume was observed on 30/Oct (Wed).
SGX Iron Ore Futures Fundamentals in Summary
China’s parliament has started its five-day meeting on 4/Nov (Mon) and is expected to announce the details of the fiscal support on 8/Nov (Fri). Analysts suggest the fiscal plan could reach 10 trillion yuan (USD 1.4 trillion), with most funds likely allocated to refinancing local government debt. The outcome is likely to drive significant volatility during the week.
China’s manufacturing PMI rose from 49.8 to 50.1 in Oct as the manufacturing sector shifted into expansion after 5 months of contraction. Non-manufacturing PMI also rose to 50.2 from 50.0.
Steel industry PMI rose to 54.6 from 49 in prior month. The PMI reading was the highest since July 2018. The output index rose to 63.6 suggesting the stimulus helped boost steel production.
Caxin’s China manufacturing PMI rose from 49.3 to 50.3 in October recovering from the dip in September.
IO China Portside inventories rose by 770k tons to 150.1 million tons last week. The pickup volume declined further by 13k tons. Accumulating inventories pose a risk to IO demand.
Based on seasonality, SGX IO Futures Dec contract trades 3.6% higher than its last 5-year average (USD 99.31/ton).
Short-Term Moving Averages Signal Bearish Trend
Prices recovered following the bearish MA crossover on 22/Oct but failed to rise above the 21-day moving average. The 21-day moving average served as a resistance level throughout last week.
Long-Term Averages Provide Support
Prices shot above the 100-day moving average on 28/Oct (Mon) and managed to hold above this level for the rest of the week. Price re-tested this support level on 4/Nov (Mon) but seems to be holding above it for now.
MACD Points to Fading Decline
The MACD suggests a weakening bearish trend, with the short-term MA positioned just below the long-term MA. However, both MAs are trending downward, making a bullish crossover unlikely without a sharp rally. The long-term MA may serve as support. The RSI is near a neutral level at 51.02.
Fibonacci 38.2% Tested Last Week
Following the retracement of the bearish trend since the start of October, prices rallied to the 38.2% Fib level but failed to surpass it. This could indicate a continuation of the bearish trend. Though, the USD 100/ton level may provide psychological support.
Price Trading Just Below Volume Point of Control
Sellers continued to dominate trading despite an uptick in buyers early last week. Price faced resistance at the volume point of control for October (USD 103.55/ton). There is another area of volume concentration at (USD 101.15/ton) which could provide near-term support.
Bollinger Bands Narrowing with Low Volatility
Bollinger Bands for IO futures are narrowing and their width is near the lowest contraction since August, increasing the likelihood of a sharp breakout. Price is currently at the mid-point of the Bollinger Bands. Historical Volatility also continued to decline last week and reached its lowest level since August.
Iron Ore Options Favor Calls
SGX IO options expiring in December have an OI put/call ratio of 0.86 as of 1/Nov which favors calls. Over the past week, trading in this contract was heavily skewed towards call with a volume put/call ratio of 0.38. Additionally, last week, near-term options expiring in November saw a large buildup of call options around the USD 105 strike suggesting bullish sentiment in the near-term. The delta-25 options skew for December options also shows a sharp increase in call IV alongside a narrowing skew suggesting high demand for calls.
Hypothetical Trade Setup
Iron Ore volatility has reached its lowest level since August. The rally last week failed to continue past the short-term moving average and the volume profile point of control and IO gave up substantial gains in the later part of the week despite the encouraging data from PMI releases. The results of the ongoing parliamentary meeting are expected on 9/Nov (Fri) and are likely to drive substantial moves in prices. Options activity over the last week showed a high concentration of activity for call options, especially at the strike level of USD 105/ton. The IV for IO options has also been rising unlike the historical volatility. A sharp upside move is likely, though, if the fiscal stimulus disappoints, prices may also decline sharply.
Expressing the bullish view through a long futures exposes the position to higher risk if stimulus disappoints. Investors can instead express the bullish view using SGX IO options. A bullish call spread benefits from an increase in prices and offers a fixed upside and fixed downside along with a smaller premium cost than a long call position. Bullish call spread consists of long call at a lower strike and short call at a higher strike. A hypothetical trade setup consisting of USD 105/ton for the long call leg and USD 109/ton for the short call leg on the options contract expiring on 31/Dec offers a reward to risk ratio of 3x. The USD 109/ton level coincides with the peak during the last rally in mid-October and is close to the 200-day moving average, prices could face resistance above this level. This position offers a max profit of USD 299/lot and a max loss of USD 101/lot and breaks even when prices rise above USD 106.1/ton.
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
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