ASX Material Stocks Are Down 15%: Buy the Dip or Stay Away?

After a stellar run in 2025 where the ASX materials sector surged 80 percent, the last month has delivered a sharp 15 percent fall that has left many investors watching their profits erode. So, is that pullback a warning sign, or is it exactly the kind of setup that prepared traders have been waiting for?

In the latest episode of the Australian Stock Market Show, Chief Analyst Dale Gillham was joined by Senior Analyst Filip Tortevski and Analyst Pedro Banales to walk through the materials sector setup, six mining stocks worth watching, a critical warning from South Korea about leverage, reader questions, and a hot stock tip.

Is the Materials Sector Pullback Warranted?

The materials sector is not what it used to be. Traditionally these were single commodity plays like coal or iron ore, but today the majors are much more diversified. Rio Tinto is expanding into lithium, BHP is heavily focused on copper, and the demand drivers underpinning the sector remain broadly intact. 

Chinese property demand has slowed and that has weighed on iron ore, but central banks are still buying gold, AI demand is still lifting copper, and the geopolitical push to secure critical minerals is only intensifying as war continues to escalate. When a sector runs 80 percent in a year, some form of pullback is inevitable. Markets go up in stairs and down in elevators, and right now materials are simply taking a breath before the next leg. 

Interestingly, the oil price and the materials sector have a positive correlation, meaning they move together despite the intuitive assumption that higher fuel costs should hurt miners. When you overlay oil futures onto the materials index, they track closely. 

Oil is currently finding support and pushing higher, and because oil tends to lead the materials sector, that suggests support is coming for materials soon, likely around the 22,000 level on the index. That would present outstanding opportunities in some of the best stocks on our market.

Stock 1: South32 (ASX: S32)

South32 is a diversified global miner with exposure to aluminium, manganese, silver, zinc, nickel and copper. All of those commodities are hot in the current boom. The key level for S32 is $4, which has capped the stock going back to 2018, with failed attempts to base above it in 2022 and 2024. 

Right now, something different is happening. Since March, this is the fifth month that price has bounced around $4. There was only one monthly close below $4 in June, and it was picked up instantly. If S32 can hold this level as a new base and push higher through $4.30, then it is very likely heading into the fives and above. Watch these lows carefully. If it takes out $4, forget about it. But if the base holds, the setup is compelling.

Stock 2: Vault Minerals (ASX: VAU)

Vault Minerals is a pure gold play with producing mines across Western Australia and Canada. Zooming out, the whole period from 1996 to 2013 was volatile and messy, likely reflecting a backdoor listing. From 2013 the stock trickled sideways, but from 2019 the patterns started to form properly, and that is when technical traders can genuinely apply their techniques. 

Vault has found a base around $3.50, with previous peaks and troughs anchoring the level, plus a supportive momentum line just underneath. What is particularly interesting is that VAU is now diverging positively from the gold price. Gold is trending down and has not yet found a base, yet VAU is trending up. That divergence suggests operational improvements at the company level, perhaps lower extraction costs or better production, and when a miner rises while its underlying commodity falls, that is a very strong signal.

Stock 3: Perseus Mining (ASX: PRU)

Perseus Mining has been in a beautiful uptrend since 2023 and recently hit a new all-time high. Given how strong the run has been, this is best viewed as a short to medium term opportunity rather than a long term entry from current levels. This is a critical point that gets overlooked far too often. Every stock analysis needs a timeframe attached to it, because the strategies and rules for short, medium and long term trades are all different. 

PRU has pulled back to trend, which is exactly what you want to see, but it has not yet found confirmation of buying. That makes right now the perfect time to look, not the perfect time to act. The level to hold is $4.48. If the stock can hold this level and generate a bullish reversal signal, look for a run up to $5.70 or back to the all-time high at $6.50. Volume is dropping off as sellers come in, which is a nice supporting signal, but not full confirmation on its own.

Stock 4: Capstone Copper (ASX: CSC)

Capstone Copper is an international copper miner with producing operations in Chile, the US and Mexico. It listed in 2024 and did what most IPOs do, initially popped and then dropped. However, unlike many IPOs, it has held above the listing price and is establishing higher bases. 

Since a low in March 2026, Capstone has been in a nice uptrend, and $12 has emerged as a critical support level with a very clear bounce off it recently. There is a genuine opportunity here, but this stock also illustrates a critical trading truth. Buying is only half the equation. If you take tips from anyone, including us, you still need to know when to sell, because nobody is going to tell you that in real time. That knowledge must live inside your own head.

Stock 5: Iluka Resources (ASX: ILU)

Iluka is developing Australia's first rare earths refinery, and rare earths sit right in the middle of the critical minerals story that continues to drive global capital flows. With the US and China increasingly parting ways on strategic supply chains, and rare earths being essential for defence applications, Australia is one of the clear alternate options being backed by Western allies.

The stock has pulled back but this time on a higher base than the previous cycle. Last cycle price came all the way back to $3.30, a level that was traditionally a major support zone. This time it has bounced from around $6 multiple times. If $6 holds, an opportunity is opening up to run back towards $10, the recent cap. 

That would represent roughly 55 percent upside potentially over a matter of months. Iluka is best treated as a cyclical rather than a buy and hold. The right approach here is buy, sell, buy, sell, because runs of 200 to 400 percent are typically followed by significant crashes.

Stock 6: Stanmore Resources (ASX: SMR)

Stanmore Resources is a metallurgical coal play, supplying high-quality coking coal to global steel manufacturers. This is both cyclical and growth in nature. Since 2015 the stock has moved from around 5 cents to $2.75, which represents over 2,000 percent growth, but with clear cyclical intervals along the way.

Right now, Stanmore has crossed above a downward momentum line, consolidated sideways, and is compressing in a tight range between roughly $2.20 and $3. On the weekly chart, higher highs and higher lows are forming, with a nice supportive momentum line underneath. With the Middle East situation continuing to lift oil, coal typically follows as countries scramble for alternate energy sources. Coal remains king for energy production, and Stanmore is setting up beautifully.

Trending Topic: The Leverage Warning from South Korea

History does not just rhyme in financial markets, it repeats. A young South Korean investor turned his savings into a fortune using borrowed money, only to watch almost all of it disappear when the market reversed. He admitted he could not breathe after the losses, yet he plans to borrow again.

He is far from alone. Margin debt in South Korea has exploded as retail investors pile into leverage trades chasing AI stock riches, and regulators are now scrambling to tighten the rules. 

This is not really a story about Korea. It is a story about human behaviour. Go back to almost every major market top in history, whether the dotcom boom, the property bubble, or the meme stock craze, and the pattern is identical. Confidence peaks, retail investors borrow heavily, convinced prices can only go higher. Leverage magnifies gains on the way up but destroys accounts on the way down. 

Are we seeing the same psychology in Australia? Current Australian margin lending sits at around $16.8 billion as of the end of 2025, up from around $15.5 billion the previous quarter. However, during the pre-GFC peak in 2007, margin lending in Australia reached $41.6 billion. Adjusting for two decades of inflation and market growth, today's figure is still meaningfully below that speculative peak. That is a useful signal about where we sit in the cycle. 

The lessons for traders are simple. Discipline breeds good psychology, and discipline only comes from skill, knowledge and strategy. You cannot have discipline without a proven strategy, and without discipline you cannot be consistent. 

Leverage without knowledge is like being handed the keys to a Ferrari with no brakes. Money on the market is not your money until it is back in your bank account, and once you internalise that mindset, you stop making emotionally driven decisions.

Reader Questions

Julian on SkinKandy Limited (ASX: SK1)

Julian asked, "Could you please analyse SkinKandy Limited?" SkinKandy is a very new listing, only around three months on the market. With such limited price history it is hard to give meaningful analysis, and Julian did not tell us his entry price, his timeframe, or whether he already owns it or is looking to buy. 

Context matters enormously. That said, the statistical reality is that the majority of IPOs trade below their listing price within six months. SpaceX is a very recent high profile example. On probabilities alone, better prices are likely to come, so patience is the more sensible approach here.

Barry on Origin Energy (ASX: ORG)

Barry wrote, "With Origin back in 2008, they rejected a takeover offer for $15.50. They're currently trading well below that offer, and it seems to have steady rising revenue and earnings with long-term energy tailwinds. My question is, being that the stock is in a near trend support, is this a good time to buy? Would you just buy on trend support or wait for confirmation of a short-term uptrend?" 

The stock has pulled back to trend cleanly, and the setup looks interesting. But buying on trend support without confirmation is a strategy that works until it does not, and one bad trade can wipe out multiple wins. Confirmation is key. It sits at a great level, the previous takeover offer gives a compelling upside target, and the risk to reward looks favourable, but wait for the trend to prove itself rather than pre-empting it.

Jody on IPH Limited (ASX: IPH)

Jody asked, "I'd love your thoughts on IPH Limited for a short to medium term trade. The stock seems to have found support at a significant level just above $3. If it can break through $4.34 it may find resistance at around $5.70 level, which also looks to be a significant level, but I would be happy with a 30% profit." 

IPH operates in the intellectual property space and has found solid support around $3.10. It has broken away from a long sideways congestion period and is now making higher bases and higher highs on the weekly chart. The $4.34 level is very reasonable to watch, and 30 percent is a sober target. Just remember that you do not exit purely because of a profit target. What if 50 percent is available? What if the next real resistance is at $6.90 or $7? Let your rules dictate exits, not arbitrary numbers.

Dejan on Breville Group (ASX: BRG)

Dejan wrote, "It looks to me like a strong long-term uptrend with support around $24. I'm not in it yet but will be looking for an entry below $30. What do you guys see as a good entry point, and how would you manage the downside risk if it turns?" 

The first issue is that $24 is already 27 percent below current price, so as a support level it is not immediately relevant. The second issue is that we are heading into earnings, which is a tricky time for discretionary stocks. Sentiment is at record lows and inflation is hurting businesses, but AI has been driving cost efficiency in retail. 

Breville has stalled at $32 to $34, and for a growth stock to continue growing it needs to be trending. Right now, the momentum is challenged. Playing $24 to $30 as a range makes sense if that is your strategy, but for real conviction you want to see the downward momentum broken first and always be aware of when earnings are being released.

Hot Stock Tip: Alkane Resources (ASX: ALK)

Alkane Resources released a June quarter report showing record cash flow, a hefty $432 million cash balance, and production firmly in line with guidance. The standout milestone is the proposed maiden dividend, which signals a shift from growth mode into shareholder returns. Combined with recent inclusion in the S&P/ASX Top 200, the company has stepped onto the main stage of institutional visibility. 

Technically, Alkane is cyclical in nature, with sharp peaks followed by extended trickle downs. Currently price is finding support roughly around its momentum line, with a strong support level at $1.20. Historically the stock consolidates and then spikes, and it is now in a larger than usual consolidation phase. The market has not reacted to the strong report the way you might expect, which is a useful reminder that even great fundamentals do not move a stock if the technicals are not aligned. 

Multiple down bars on the weekly suggest a possible reversal is due, but wait for confirmation rather than trying to catch a falling knife. Alkane is a gold player with additional diversification, well placed to capitalise on the broader materials boom. Definitely one for the watchlist.

The Real Lessons Behind This Analysis

Two themes ran through the entire episode. The first is context. Every trade needs a defined timeframe, defined rules, and defined risk parameters. Asking simply "should I buy this stock?" is meaningless without context. Short term rules do not work for long term trades and vice versa. The second is confirmation. Buying dips without confirmation is a habit that works until it destroys you. The traders who consistently win are those who wait for the market to prove them right before committing capital. 

Buy and hold is another concept worth questioning. Stocks like CSL and Cochlear have destroyed decades of buy and hold gains in single downturns. The safer approach is hitting singles consistently, taking defined profits from trending moves and rotating capital, rather than sitting through massive drawdowns hoping to eventually recover.

Building the Skills to Trade Setups Like These

Everything discussed in this episode, from momentum analysis to confirmation rules to leverage discipline, is teachable and repeatable when you have the right framework. Our share trading education is designed to give traders exactly that. For anyone starting out, the Short Course in Share Trading provides a solid foundation in technical analysis, trend identification and money management. 

The Diploma of Share Trading and Investment is the only government accredited course of its kind in Australia and delivers a complete professional framework. Graduates ready to sharpen their edge with time analysis and Elliott Wave techniques can progress into the Advanced stock trading course. To learn more about our approach and results, visit About Wealth Within.

Final Thoughts

The materials sector has pulled back 15 percent after a huge run, but the demand drivers remain intact and the setups across the sector are compelling. South32 is holding a critical $4 base with potential to break into the fives. Vault Minerals is diverging positively from the gold price and looks close to ready. Perseus Mining is pulling back to trend but needs confirmation. 

Capstone Copper has bounced off critical $12 support. Iluka is based on a higher floor with 55 percent upside potential to $10. Stanmore Resources is compressing beautifully with a coal tailwind building. And Alkane offers a diversified gold play with fresh institutional visibility. 

But none of these opportunities matter without the skill to time entries, place stops, and manage risk properly. The lesson from South Korea is that leverage without knowledge is a wealth destroyer. The lesson from every reader question tonight is that context and confirmation matter far more than picking the right stock. Watch the levels, wait for the signals, and trade with rules rather than emotion.

Disclaimer: This article is general in nature and does not constitute personal financial advice. Always conduct your own research or consult a licensed adviser before making investment decisions.