article 3 months old

Trend Remains Up For Copper

Technicals | Oct 18 2017

Bottom Line 17/10/17

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 288 / 250 / 241
Resistance Levels: 340 / 350 / 388

Technical Discussion

Copper prices have jumped to new 3 year highs with recent data out of China suggesting that the economy is no longer slowing and is in fact continuing to remain quite robust. Infrastructure spending has risen which is keeping metals on the bid and producer prices in September rose by 6.9% which was above expectations. There also appears to be optimism related to what is going to come out of China's National Congress meetings which we talked a little more about in our Shanghai Composite review tonight. Copper has certainly shown that it now has a pulse again, after years of being in the wilderness.

Reasons to be bullish longer term:
→ 288 ideally looking to revert to support. 
→ surpluses reducing or reverting to deficits being monitored
→ price now looking committed to staying above the 200 day MA (see daily chart)
→ longer term bullish reverse head & shoulders triggered at 289 (new contract)

We continue to remain fixed to the weekly chart and the reverse head and shoulders pattern. These patterns are also commonly called inverse head & shoulders patterns or head and shoulders bottoms, and from our experience having studied and monitored outcomes of thousands of these over a many number of years, they tend to be more reliable in regards to pattern attainment the more symmetrically they form. We are more than happy with both pattern and timing symmetry here on the weekly copper chart. Sure the neckline could be a little more horizontal, yet overall the pattern is almost text book. These patterns also tend to perform better when the breakouts are on high volume and yet again we saw this within the weekly price / volume attributes on the 28th July.

Another common characteristic that also leads to pattern target success is the successful retesting we often see of the neckline. And once again on the weekly chart we have witnessed this phenomenon occuring, with price reacting very much to the positive ever since. So with levels back at 3 year highs, there is nothing to complain about within the immediate analysis. Yet we do need be aware of the Type-A bearish divergence that is now in play on the weekly chart. It may or may not trigger yet we need to keep an eye on it regardless as it presently looks quite strong. Our pattern target continues to call for 387 and we see no reason why this cannot be attained over the coming months. 

Trading Strategy

Unfortunately in between reviews we were taken out of our long trade for break even at 292.10. Price only ended up going as low as 289.40 before quickly shooting higher. It happens !!! We've been watching the weekly chart ever since to assess whether we would have a second bite of the cheery by trading long above 317.85, especially with the reverse head and shoulders pattern still in play. Yet we decided against it with the bearish divergence in play on the weeklies and price well overbought on the dailies. Definitely a 50/50 proposition that we may regret down the track yet that's trading. We will continue to monitor regardless. 

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

Risk Disclosure Statement

THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.

Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms