A DROP of more than 6% this week for heavyweight JSE-traded resources stocks may presage further declines, according to analysts, citing technical indicators and excessive optimism among investors about Chinese economic stimulus measures.

A “relief rally” in commodities prices that started in March, ending eight months of losses, had been overdone, Stephen Meintjes, the head of research at Imara SP Reid, said.

“Quite a few of the prices are way ahead of the fundamentals,” Mr Meintjes said. “China has ticked up in the last few months, but the stimulus measures probably won’t last forever, it will taper off this year.”

The FTSE/JSE Africa Resource 10 index was down 6.5% this week by 9.25am on Thursday. Diversified mining company Anglo American and gold producers Sibanye Gold and AngloGold Ashanti are among its 11 members, along with petrochemicals giant Sasol and SA’s two largest paper producers.

Trading data suggested the benchmark stocks were poised for short-term weakness, said Peet Serfontein, a technical analyst at Nedbank Group, with the index set to drop below its 200-day moving average.

“That’s also indicating that the price has been extended to the upside, and it needs to release some pressure in the strong trend,” Mr Serfontein said. “You can definitely expect some weakness coming through in the index.”

Investors keen to increase their holdings of JSE-listed mining and resources stocks should wait, both analysts said. “You’ll probably get opportunities to buy at the same, or better prices in a few months’ time,” Mr Meintjes said.