Buy Rio Tinto (RIO)
Says technical analyst Thierry Laduguie of Eyield.co.uk - 13/04/08

The rally in UK stocks appears to be over following GE’s profit warning. Before the warning the consensus was that the economy was slowing. Now there is evidence that the slowdown is hurting companies. When one of the largest companies in the world does not meet targets, the chances are that more companies will miss earnings forecast.

This comes at the end of four-week rally in equities which I have labeled a bear market rally. This is because one of my sentiment indicators, the 34-day BTI, has been negative since January. A negative 34-day BTI is associated with bear markets. I suspect the next leg down has started but for a few stocks like Rio Tinto (RIO) and BG Group (BG), the oncoming decline could be seen as a simple correction. These stocks are making new highs in a bear market.

Take Rio Tinto (RIO). The recent break into new highs completes an inverse head and shoulders which is a bullish continuation pattern. Note that prices tested the area 5910p-5920p on several occasions before breaking decisively higher a few days ago. The long term uptrend is intact. The stock may pull back in the next few days if the general market continues to decline but in the medium term an initial target is 6800p.

The unique timing analysis at e-yield has been developed by Thierry Laduguie, who has been working for investors since 2000.  For more information, visit E-yield.co.uk