Stock of the Day: Glencore faces fork in the road

Glencore has posted its best annual results in years.

Stock of the Day: Glencore faces fork in the road

After a long-trailed return to financial health and stability, Glencore has posted its best annual results in years. The main question for investors is how it will deploy funds from operations that now amount to $11.46bn, up 49%. There’s no mystery about the reason for that cash pile. This is the most efficient and cost-conscious manifestation of Glencore ever, plus its key commodities rose some 30%-40% last year. Investors may fear that shades of the gung-ho Glencore of yore could return, particularly with CEO Ivan Glasenberg, who presided over its near collapse, still in control. But to give him his due he has stuck to leverage promises so far, declining to pass the highest possible amount of cash to investors. He has however found it less easy to resist deal-making. Even so, he appears to be aware of new limits. Most measures now rank Glencore’s market rating far lower than rivals like Rio, and BHP, to which it used to trade at a premium. So long as there is no repeat of the 2014-16 commodity price collapse, the chances of Glencore messing up again look low, though after a near 300% rise over three years, investors will run out of reasons to keep adding the stock if the group stagnates. Doing so would of course be out of character.

Thoughts on Glencore share price chart

When a chart is this simple, what’s the point of overcomplicating our view? The validated uptrend since late 2015 is as intact as one could hope for. The stock is pointing upwards after rebounding with the market earlier this month. It’s next upside target would be the six-year high at the end of January of 416.91p. In the event of failure as momentum verges on over-stretched, rising trend line support is likely. Any selling would also have to break support between 388p-358p to gain traction.

Glencore Plc. share price chart – daily intervals

Source: Thomson Reuters and City Index

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