Copper: Short Term Pain, Long Term Gain

Technicals | May 05 2022

Bottom Line 05/05/22

Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: $3.88 / $3.50  (July 2022 )
Resistance Levels: $5.17 (all-time highs) 

[All prices Comex futures US$/lb]

Technical Discussion

Reasons to remain bullish longer-term :
→ copper surpluses suppressing price in the past yet strong demand likely in a clean energy environment
→ $3.50 old resistance has potentially reverted to support
→ price action corrective since mid-2006, yet the move off the March 2020 lows has reverted to impulsive
→ the immediate consolidation phase is shallow and should prove bullish eventually

We are sticking to the weekly chart to cut out some of the noise being witnessed at the moment. Stepping back a bit we continue to remain buoyed by the bounce off the higher degree Wave-[B] from back in March 2020, with our positioning of the trend now looking for price to head higher longer term as part of a higher degree Wave-[C].

Now we could embark on this move as an (A)-(B)-(C) pattern north where post price breaking out we witness it heading higher towards $7.00 via an equality move. Or if the higher degree Wave-[C] unfolds as a 5-wave pattern, then we could easily head well beyond this $7.00 target over the next couple of years.

Right at this juncture, we have the start of this move already locking in a Wave-(1) or (A) high in May 2021, with the Wave-(2) or (B) now highly evolved after having been 12 months in the making so far. The pattern is loosely an Elliott ascending triangle that has 5-internal swings. And by all accounts it should now be completed at the recent low circa $4.20. The triangle pattern remains nice and shallow which is positive, is hovering around the all-time highs, with price presently oversold on both the weeklies and dailies. So even though buyers have yet to return to the playing pitch, they could now be getting very close to making a reappearance. The bullish breakout is above the Wave-D high circa $5.06.

Trading Strategy

We are presently long at $4.85 with initial stops placed at $4.12 which is just below the Wave-C low of the immediate pattern. Ideally, we didn’t want to see the pattern extend like it has with 5-internal swings. The consequence of this is that price has now made its way back to near our stop as part of the proposed Wave-E. Not ideal yet we just have to manage things accordingly when things don’t go to plan. So all we can do is respect the stop at $4.12 and see if we can continue to keep clear of the negative noise that has been hanging around over the past few weeks.

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