Price Bubbles Always Burst: Mining Giant Rio Tinto Is On the Price Downside

After a multiyear price upside, Rio Tinto (RTP), a huge international metals mining company (aluminum, copper, diamonds, energy products, gold, industrial minerals and iron ore.), peaked at $554.93 on May 16, 2008. The stock closed at $339.99 on September 2, 2008, down 38.77 from that high.

A closer look at RTP's long-term price pattern using monthly closes converted to the log scale, shows that RTP moved above the upper boundary of its long-term upside price channel (parallel green upside lines) in mid 2005. This is the beginning of the price bubble that eventually peaked in mid May 2008.

Now, the stock is headed down. For the bubble formation to complete, RTP would have to fall to around $200 to $250, which approximates the upper boundary of its long-term upside price channel.

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Posted September 3, 2008.