IBD Stock Of The Day Nears Buy Point As China Reopens – Investor's Business Daily

BREAKING: Market Mixed As It Tries To Shake Off Two Down Weeks
Composite Rating
Industry Group Ranking
Emerging Pattern
Cup with Handle
A positive chart pattern named such because it resembles the outline of a coffee cup with a handle. The pattern can last from seven weeks to as long as a year, but most are three to six months.
Rio Tinto (RIO) is Wednesday’s IBD Stock Of The Day as mining stocks, buoyed by hopes about China’s chaotic reopening from Covid, show strength despite global recession fears. RIO stock is near a buy point.
The London-based diversified miner is one of the world’s biggest producers of iron ore, a key ingredient in steelmaking, which China dominates. Rio Tinto also engages in the mining and processing of copper, aluminum, lithium, uranium, diamonds and more.
Iron ore futures prices have rallied nearly 40% since hitting bottom in late October, but they’re still down more than 40% since May 2021, when RIO stock hit an all-time high. Copper prices have climbed about 10% over the same period.
In a Dec. 19 note, BMO Capital Markets analyst Alexander Pearce highlighted “significant potential upside to copper exposure” for Rio. That followed closure of its acquisition of Turquoise Hill Resources, which gave Rio 66% ownership of the Oyu Tolgoi gold and copper mine. The Mongolian government owns the rest.
Rio Tinto stock rose 0.7% to 71.53 in Wednesday afternoon’s stock market action. The move lifted RIO stock close to a 73.44 buy point from a long cup-with-handle base.
Investors could use a move above the Dec. 28 high of 72.14, which would also break the handle’s downsloping trendline, as an early entry point.
RIO stock’s relative strength line, the blue line in IBD and MarketSmith charts that tracks a stock’s progress vs. the S&P 500, has climbed to the cusp of a multiyear high. According to IBD Stock Checkup, RIO stock is ranked No. 3 in IBD’s Mining-Metal Ores industry group based on a range of fundamental and technical criteria.
Be sure to read IBD’s daily afternoon The Big Picture column to stay on top of the prevailing market trend and what it means for your trading decisions.
BHP (BHP) and Vale (VALE), both iron ore majors, and copper giant Freeport-McMoRan (FCX), also have similar cup-with-handle patterns.
In a Nov. 30 investor presentation, CEO Jakob Stausholm said that Rio Tinto had missed iron ore production targets for three straight years. He noted “broken” relationships with the nations and communities where its mines are located, as well as a failure to invest for the long term.
Yet the company has turned the corner, he said. Rio was “on track to deliver one of our best second half production results.” It has commissioned its first greenfield mine in almost a decade and unlocked “high-grade” tons from its Rhodes Ridge mine in western Australia. He also highlighted strides in operational safety  and installing renewable energy.
Stausholm sketched out plans to deploy $3 billion in growth capital per year and $500 million per year on efforts to decarbonize the business. Another $250 million will go to greenfield exploration, which will focus on copper and a growing battery minerals program.
“The world will need more aluminum, more copper, more high-grade iron ore and more lithium, and this is where we are focusing our growth investments.”
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