Company Interview / Three miners to 'buy' based on the charts (and China!)

Michael Gabel from Fairmont Equities says there is a significant shift from banks to materials, with strong upward trends in the broader Australian market. Michael notes that the interest rate cutting cycle and new Chinese stimulus are just beginning, suggesting more long-term growth opportunities.

Uranium stocks like Paladin (ASX:PDN) and Bannerman Energy (ASX: BMN) are highly promising, with tight supply and rising demand indicating substantial future gains.

In the iron ore sector, Michael highlights Fortescue (ASX: FMG), predicting further growth despite recent price hikes. Even as iron ore prices might fluctuate, long-term prospects remain strong. Michael also sees potential in Pilbara Minerals (ASX: PLS) within the lithium market, albeit with more moderate expectations compared to other commodities.

Full unedited transcript:

0:12

Hi there. Welcome back. Nice to have you with us for the Monday edition of The Trade. Before we get to the charts, let's take a look at what traders are watching today. And we are watching that China stimulus story and what it is injecting into the market. The latest announcement that it will cut existing mortgage rates by mid October. And that has really lit a rocket under iron ore today. The Singaporean contract up by close to 11%. Coking coal also going well in Chinese futures. We did see some data from Japan this morning. August factory output was down by 3.3%. And again we're looking at weakness in Japan. Generally speaking, uh, but it stands in stark contrast. What we're seeing when it comes to those Chinese markets that are coming online as we speak. We've also had some, uh, some data out of China as well with the composite PMI at 50.4. So that is up

1:12

above, um, that mark of contraction versus expansion. So it is in expansionary territory. Although the non-manufacturing PMI in China has fallen slightly and is sitting on that 50 level in New Zealand business confidence has jumped again. And we are watching Hurricane Helene and geopolitics driving the price of oil.

1:35

So let's get into the technicals of the day. Michael Gabel is joining us from Fairmont Equities Michael. Good morning. Nice to see you. Thank you. Okay so we saw that big rotation out of banks into materials. So we saw some really steep rises in those prices for the big miners. But interestingly last week the market was flat because of course it came out of banks. Yeah. So how are we set up. Look I mean overall the net result is the broader market should head higher. So we've seen yeah, a bit of bit of funds come out of out of the banks of course, but you know, a lot of money flowing into, into resources. So this is something that, um, that I spoke about here on the desk a couple of weeks ago. Um, we're already looking to move out of out of banks into resources. This is a chart of the broader market. So generally it's it's still heading higher. So, you know, day by day it might feel like it's not making much progress. But again, we could see ever since

2:35

that breakout above 7600, it has been been trending higher in in a bit of a channel. I mean, we're towards the top of that channel. So, um, you know, the pace might slow down for the time being, but generally there's no warning signs with the way the index is trading. I expect it to continue. Um, continue heading higher from here. Wow. So, you know, record heights and that continues to the end of the year. Or we got a very touch and go, yeah. Beyond that, I mean you'll get your dips along the way. But you know, we've only just started the interest rate cutting cycle. We've only just started seeing, um, stimulus out of China, and we've only just started seeing the short covering happened in, in resources. So this this has legs this this further to go. Well maybe that takes us to our next chart. Does it Paladin. Yeah. So I've um, we're all talking about iron ore. And I will have a look at the Fortescue chart shortly, but, um, I think in terms of the material space or any space in the market,

3:35

I think one of the biggest opportunities in the next 12 months, I still maintain is this uranium space. So it's sort of dropped off the radar a bit. But, um, you know, there are a lot of factors telling us that, um, that these stocks can head higher. So, you know, we've got, you know, very tight supply, increasing demand. Um, but if we just purely look at charts, this is a monthly chart of Paladin. I've, I've shown this a few times over the past 12 months. Major resistance level at $10. So it broke above that, um, end of last year rally to about 18. And it's come back to retest that zone. So it might be hard to see on the screen, but I've circled at the far right what it looks like on a monthly chart, and that's a nice successful retest of that, that $10 zone. So, you know, today's the last day of the month. The shares are down slightly. But essentially you've got your retest of that that zone. And it should just accelerate upwards from here. So um you know I'm not showing this chart doesn't actually show the all

4:35

time high, which was closer to $90, um, in current money. But, um, what you could see at the far left hand side levels up near sort of 4550. That was just before, um, the Fukushima disaster. So look, it's hard to put a price target on it, but when I look at a chart like this, yeah, I expect an acceleration from here. And, um, I think that in the next few months you could see it. So pass those um, the $18 highs from earlier this year and um, and over the next 12 months, um, it, yeah, it could go quite a bit higher because we don't have that sort of manic buying of, of uranium stocks yet. The focus is elsewhere. So that's that's one of the more established ways to play uranium listed on the ASX. Now, do you ever go to the smaller end and one of the charts tell you they reflective of that momentum? They're all very similar. I've brought a chart along of a smaller company which is um Bannerman Energy. So they have a mine. It's

5:35

they're still Namibia I think. Yeah. So they're right near where Paladin is. Paladin is now producing. These guys are still a few years away from that. But if we just look at, say, a smaller time frame, this is a daily chart. There was a very clear downtrend, um, since the stock peaked in May. Um, and that was due to general market weakness plus the spot price heading lower. Now, when it comes to uranium, the spot price doesn't really mean anything. Um, the long term contract prices, which get struck at the end of every month, they haven't had a down month for two years in a row now. So as I've tried to say before on this show, look at the long term pricing. Um, it looks very attractive. And I think the market is starting to wake up to that. Um, Bannerman Benjamin broke the downtrend a couple of weeks ago. Very big volume, which is what I've circled there on the right hand side. So being, you know, a smaller company still developing their resource, um, you know, if everything works out, um, in this space,

6:35

as I expect it will, you know, these are the sorts of stocks that give you that, that extra oomph in, in the returns, um, compared to the producers. So, yeah. Trading very well. I think this is a buying opportunity as well for anyone looking for, um, for uranium stock at a minimum, it should go and retest the old high for 80. Um, then I think it will go through that. Okay. Paladin. Bannerman, let's get to Fortescue because it is the topic to de jour. It is. Um, so I guess there are differing views as to whether or not the price of iron ore will stay elevated above that 100 metric ton. Most do expect it to retreat. Yeah. Um, because it's a complicated fix that they're trying to do there in China, particularly when it comes to property. But even given the the moves of the past couple of days, do you think there's still more in Fortescue? I would imagine just looking at this chart, the answer would be yes. Yeah, that's that's right. So if we focus just on what it's done in the last few days, it looks like it's yeah,

7:32

achieved quite a lot already. And I mean it has. But when you, when you zoom out and have a look at this weekly chart, you could see that, you know, the sorts of moves that, that we're seeing at the moment. It's it's still in the early phase. So if we have a look at the bounce at the end of 2022, and most especially at the end of 2021, you ended up with a move in the order of sort of 40, 50% off the lows. Um, and as I've mentioned on this show before, everyone hated iron ore. Everyone was shorting the companies. Um, and that's, that's when you need to focus for the swift turnaround. So we've we've got the benefit of not only is there new money flowing into, um, into these miners, but you've got short covering as well. So still in the early stages, I think, you know, in terms of the chart, I'd put major resistance up near 24. So I think any, any sort of dip here would be an opportunity. And, um. Yeah. Look, I mean, they've been up for a few days in a row. This isn't a move

8:32

that's only going to last a few days and then fizzle out. Um, yeah, there's more upside to go. Okay. Very quickly. Um, Paladin, is is the bottom end for lithium? Lithium? Much harder, I think, you know. Paladin. Sorry. Pilbara. Pilbara. Pilbara. Yeah, yeah. So with plus. Um. Yeah. Very nice reversal on that chart there. Obviously a lot of short covering. Um, yeah. To me this looks like a bit of a breakout. We'll see a bit of upside. It's. Yeah. Not as attractive as some of the other commodities but you'd expect a recovery from here. So the point of this chart is look if you've got this stock hang in there. You're going to see a bit of a recovery. That's a hold to end. All right Michael Gabel Fairmont Equities. Thank you so much. Thank you. Great to have you in. That's the trade for today. Stay with us.