BHP is trading at key resistance with an unlikely breakout

BHP Group Limited (LON:BHP) continued gaining for the third week closing at $78.12. The mining company has been in negotiations with creditors and Chilean authorities for iron ore mining in the country. However, the company has not yet reached a deal due to the lack of legal guarantees.

The recent appreciation in the stock’s valuation comes as evidence emerges that the iron ore industry may be set for significant structural changes. There being no new supply means that the values of existing businesses would appreciate significantly. Investors took note of the news, pushing the stock price higher.

BHP Group to retreat from key resistance

Technical analysis indicates that the valuation of $78.12 nears the critical resistance level of $80. Consequently, the stock is projected to start retracting, especially because there is no major news to support any further gains.

Baseline analysis shows reference support at $55. Indicatively, the price is highly unlikely to drop below $55. Key factors that would drive the decline in price include attempts by current investors to exit the stock. Factors that would help support the stock at higher levels include key announcements such as reaching a deal on the $10 billion Chilean investment.

Summary

BHP is set to decline from the current $78 resistance level to find support at $55. The company expects an agreement with creditors and the Chilean government to invest about $10 billion in mining activities. However, it is not clear when that deal would be reached or how the market would factor the deal into pricing. The stock is therefore a recommended sell at the current price.