Anglo American share price slowly forms a double bottom pattern

Anglo American (LON: AAL) share price has underperformed other mining stocks this year. The shares have dropped by more than 30% this year while the SPDR Metals ETF (XME) has jumped by almost 5% this year. 

Anglo American shares have lagged other UK mining stocks like Glencore, Rio Tinto, and Endeavour Mining. They have plunged by more than 38% from the highest level this year, giving its market cap to £29 billion.

Commodity prices ease

Anglo American stock price has been in a strong downward trend in the past few months as the prices of key commodities fall. Copper has crashed by more than 14% from the highest level this year. This is important because copper is the biggest part of Anglo American’s revenue.

The company’s mine production increased by 28% in the first quarter helped by its new Quellaveco mine in Peru. This increase was offset by a 15% drop from its activities in Chile, the biggest player in the copper industry globally.

The price of other key Anglo American metals like nickel, platinum, and iron ore has also dropped this year. Platinum price has dropped by almost 20% from the highest level this year. Similarly, nickel prices have fallen by over 22% this year.

The most recent mining news was the company’s happenings in Botswana, one of the top diamond countries. Anglo American De Beers reached a deal with the Botswana government. The government’s company will take 30% of diamond output and the number will keep rising to 50%.

Diamonds are an important part of the company’s business. It has a 52% EBITDA margin, which is equivalent to $1.4 billion. This margin is the second one after its PGM business.

A bullish case can be made for Anglo American stock since analysts believe that commodity prices will resume the bullish trend.

Anglo American share price forecast

AAL chart by TradingView

The daily chart shows that the AAL stock price has been in a strong bearish trend in the past few months. It dropped below the important support level at 2,483p and 2,348p, the lowest levels on September 28 and July 22nd, respectively.

The stock has moved below the 25-day and 50-day moving averages. At the same time, the current price is important since it was the lowest level on May 31st. This means that the shares have formed a double-bottom pattern whose neckline is at 2,602p. Therefore, a bullish breakout cannot be ruled out.