When Will the Mining Stocks Bubble Burst?

Pushed up by the global demand for base metals and mergers and acquisitions speculation, mining stocks are trading at or near all-time highs. But many of these stocks are making price bubbles with their price patterns showing parabolic upsides.

Rio Tinto (RTP), a large mining conglomerate, is one such stock. Its price upside is unsustainable, but when will this bubble burst?

Proponents for global growth tell us that strong demand for commodities will continue for years. But at some point the demand will begin to slow, at which time the commodity-based stocks will have significant corrections.

The log chart for RTP shows what could happen. When the bubble bursts, RTP could drop 50 percent or more and still be within its long-term upside price channel.

Investors could be in for a bumpy ride.

Related Articles:

Has Rio Tinto Peaked? - Two Chart Views
Metal Mining Stocks
Price Patterns - A Bubble Top Is an Extreme Pattern


Posted January 3, 2008.