Copper: Longer Term Bullish

Technicals | May 25 2022

Bottom Line 24/05/22

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

[Note: All prices US$/oz Comex futures]

Technical Discussion

Reasons to remain bullish longer-term :
→ copper surpluses have suppressed price in the past yet strong demand now likely in a clean energy environment
→ $3.50 old resistance has potentially reverted to support
→ price action corrective since 2007, 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 the noise, and we cannot emphasize enough that the impulsive bounce off the higher degree Wave-[B] low from back in March 2020, combined with the shallowness of this immediate 15-month consolidation phase, is keeping us very buoyed looking well ahead.

As discussed in our video tonight, the immediate sideways consolidation phase has morphed from a symmetrical triangle to an ascending triangle to a more simple flatter type box pattern. It happens, and is why consolidation phases can be so complex.

Yet what we are liking here overall as mentioned is the shallowness of the pattern. With it not even having retraced to the 38.2% pullback zone which would be the minimum expectation for a Wave-(2) or (B) basis our positioning of the trend. Yet shallow patterns like this generally hint to us that the sector is bullish and keen to get on with the job.

So from here, we continue to expect price action to breakout higher rather than lower. We have been talking about in previous reviews that if a bullish breakout were to occur, then the $7.00 price zone would be our minimum expectation. Minimum as that target aligns a simple A-B-C equality move occurring.

Yet there is scope for any breakout to evolve as a 5-wave pattern as well which means levels beyond $7.00 being attained eventually. This is a weekly chart we are looking at so everything takes time. So for now, we are continuing to like what we are seeing unfold, and especially moving forward from here with the 15 month consolidation phase now potentially having drawn to a close.

Trading Strategy

We were stopped out of our aggressive entry for a loss. As the consolidation pattern continued to morph, it immediately put our trade at risk. So all of a sudden our low-risk entry turned into a trade well and truly at risk of being stopped out as the pattern structures changed. And this is what ended up happening.

Yet the overall analysis remains the same which is longer-term bullish. And with the flatter type pattern now in play, the bullish trigger will be at $5.06. Which will then confirm via a move that sticks above $5.17 which is the all-time high tagged all the way back in 2011. Too early to offer up another trade just yet, although we will continue to monitor things very closely from here.

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