Although traded on the New York Stock Exchange, Rio Tinto plc and its co-company, Rio Tinto Limited, are major drivers within the Australian economy and the basic materials industries of the ASX 200. A research and exploration company with headquarters in London and activities within Australia and North America, Rio Tinto also has concerns in Europe, Asia, South America and Africa. The company locates, retrieves, and processes natural resources including aluminum, iron ore, copper, diamonds, gold, energy products, and industrial minerals such as talc, bauxite, titanium, and salt.

Because of its concentration in basic materials, Rio Tinto is well positioned for the expected global economic recovery. The minerals it mines and processes are the basic building blocks needed by most other companies around the world to produce manufactured goods, and therefore the earliest signs of economic recovery are often seen in this industry.

In the past 52 weeks, the stock RTP traded as low as $59.20 (U.S. dollars) on 4 December 2008. This was clearly undervalued, however, and since that date it rapidly climbed to its current range of $169.00 to $177.00. Its Beta is 1.51 and EPS −1.57, and the company paid dividends of $2.72 (2.53%) on 18 February 2009 and $22.81 (18.14%) on 8 July.

On 11 June, RTP set its to-date 2009 high of $212.50, followed by a reaction low of $124.56 on 10 July. Drawing trend lines from these points builds a consolidation triangle, which it broke above on 8 September with a gap-up opening to $169.17. However, it left behind an unfilled gap between 190 and 200.

Figure 1 Chart 1 shows how it broke out of its latest triangle. There is a gap that it will go up to fill from 190 to 200.

Redrawing the trend lines from the same dates, but raising the upper boundary to reflect the new reaction high at $183.37 set 16 September, shows RTP continuing to consolidate within its new triangle. Now, however, in addition to the previous gap, there’s a new one between 160 and 165 as well.

Figure 2 Chart 2 shows the next triangle formation. If it follows the trend, it has room to go back down before it fills the gap in Chart 1. This chart also shows a gap to be filled in from 160 to 165.

In summary, with its close at 176.41 for 23 September, I see it filling in the 160–165 gap here soon, staying inside the Chart 2 triangle formation, then heading back up. We shall see.

Technical analysis by Craig Liles

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