Technicals | May 30 2019
Bottom Line 29/05/19
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 2.55
Resistance Levels: 2.80 / 3.00 / 3.44 (new contract)
'Copper prices have historically always been seen as a gauge on Global Economic health. So it's something we have been wary about seeing the metal continuing to struggle over the longer term. ' Over the last few sessions Copper has been attempting to rise yet overall things remain negative. Subdued at best. Trade tensions are clearly keeping sentiment fragile. It has lost 7% this month alone even though inventories have been on the decline. China is a major consumer though so what may give it some form of boost over the coming weeks and months is if China moves on expectations that it is going to add economic stimulus into its economy. China accounts for around half the global demand for industrial metals such as Copper. Keep an eye out for the upcoming Chinese manufacturing PMI's as well. Particularly for new orders and export components, to gauge demand prospects for Copper over the coming months.
Reasons for optimism above 3.00:
→ surpluses reducing or reverting to deficits being monitored
→ Price back above the 200 day MA which is positive
→ 2.55 support critical yet presently holding (new contract)
'The range between 2.55 and 3.00 (new contract) continues to have our interest. Price action is in no mans land within this range yet we do presently see this as being an energy building exercise. With our expectations sticking with a breakout move eventually triggering higher rather than lower.' This continues to be the rhetoric, yet for now price action is not backing it. As such this is still a 50/50 proposition. Bearish below 2.55 yet having bullish potential above technical and psychological resistance circa 3.00. Strong selling in mid April (see chart), set the scene for this recent drop. Yet throughout May we have seen volume lowering which could be indicating that sellers have potentially started to exhaust themselves. It is still way too early to tell of course, and as such a retest of major support at 2.55 is still not out of the question. On the flip side, if price can make a convicted move above the 200 day MA at 2.80 on some increasing volume over the coming weeks, then there will be reason for us to start to become cautiously optimistic. Overall though Copper remains weak, and this has continued to be the case for quite a number of years. And so the struggle continues !
We are already long aggressively at 2.89. Our stop is at 2.61 yet it is clearly under pressure. Aggressive strategies are all well and good when they prove, yet sometimes the more conservative approach is the way to go. Especially when markets or stocks have been in sustained downtrends like Copper has. And the more conservative trade here is above resistance at 3.00. Nothing further to do with our risk management for now. So keep the stop where it is and lets see if the waning volume we have seen throughout May can be a catalyst towards a move back up toward 2.80 and the 200 day MA. We remain neutral to negative whilst price remains below this important line in the sand.
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