Technicals | Apr 05 2018
Bottom Line 04/04/18
Daily Trend: Up
Weekly Trend: Neutral
Monthly Trend: Neutral
Support Levels: 2.90 / 2.82 / 2.55
Resistance Levels: 3.35 / 3.45 / 3.54 (new contract)
Technical Discussion
The recent moves lower in Copper [Comex futures] have been quite negative on the surface, yet over the past week or so price has yet again found buyer support just above the eagerly watched support line circa [US$]2.90 – 2.93. So clearly it's a technical bounce, yet fundamentally it has coincided with stronger than expected manufacturing growth being reported out of China and also demand coming in for other base metals such as Nickel. Iron Ore presently remains on the nose though, yet if a technical bounce is to occur with this metal, it is now at levels between 60.00 and 65.00 where we would be expecting this to happen. We now just need to see if we can get some upside follow through over the coming weeks to keep our longer term bullish rhetoric on Copper well and truly on the table.
Reasons to be bullish longer term:
→ 2.88 – 2.90 (new contract) ideally looking to revert to support.
→ surpluses reducing or reverting to deficits being monitored
→ price looking committed to staying above the 200 day MA (see daily chart)
→ reverse head & shoulders pattern triggered at 2.89 (see weekly chart)
'Our go to larger reverse head and shoulders pattern on the weeklies remains in play with it's target looking for 3.87 medium term…. ' The box pattern / consolidation phase price is presently rotating within, also has a similar target if it can break out to the upside above 3.35. Our main issues at the moment though are twofold. Firstly the consolidation that has been evolving since mid last year is starting to get top heavy. Secondly price has recently dropped back below the 200 day moving average which it hasn't done so since late 2016. The latter may only be temporary though with price more immediately now looking to get back above this closely watched line in the sand. Basically both these negative factors will only be overcome if buyers can return and pretty much straight away. The recent bounce off support had some volume attached which is a positive, and any further increases in volume backed by higher levels being achieved, will start to take some bearish pressures off the price chart. And if price does attempt to swing lower yet again from here, there is some strong looking Type-A bullish divergence sitting in the wings that may just hold things together over the shorter term as a minimum. All bullish bets are off below 2.90.
Trading Strategy
We have had a trade recommendation in place here to trade long at 3.35 with the stop amended to 2.93. Yet after the last week or so of trading, we have decided to get more aggressive on our entry and have therefore amended our recommendation to now trade long at 3.08. For more conservative traders feel free to stick with the original recommendation.
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).
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