Copper: Buyers Required

Technicals | Jun 29 2022

Bottom Line 28/06/22

28/6:
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: $3.50 / $2.85 (September 2022 )
Resistance Levels: $4.08 / $5.17 (all-time highs) 

[All prices Comex copper futures US$/lb]
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 reverted to support
→ price action has been corrective since 2007, yet the move off the March 2020 lows reverted to impulsive
→ the immediate shallow consolidation phase has broken lower yet depth is still more than acceptable.

We are sticking to the weekly chart to cut out the noise, with the immediate box pattern’s 15-month consolidation phase keeping us very buoyed looking well ahead. The structures around the pattern though need to continue to hold strong, with a spoiler alert coming into play if a break below $4.00 were to occur.’

Well since our last review price did drop below our $4.00 line in the sand. Ideally, we would have liked the shallow sideways range to have held as overall the patterns were looking very robust and bullish indeed. Yet basis typical depth for a Wave-(2) or (B), the drop we have recently witnessed is still more than acceptable.

Wave-(B)’s often drop into the 38.2% – 50.0% retracement of the previous move north, with Wave-(2)’s typically dropping into the 50.0% – 61.8% pullback zone. So with price now trading around the 50.0% zone via the recent drop to $3.64, the timing is now right to be looking for buyers to re-enter the fray. Especially as we have support sitting only slightly lower circa $3.50.

Last week’s drop presented as a wide-ranging weekly price bar combined with it being associated with some above-average volume. It did close a little off the lows which is better than it closing right on its lows, yet we need to see better buyer conviction before we can start getting even remotely confident on the base metal.

So right at this juncture what we need to see is $3.50 support holding strong, and buyers returning over the coming weeks. We will then start to gain some confidence if old minor support (now resistance) circa $4.08 can be reclaimed. Overall we continue to like the looks of the Copper chart from a medium to longer-term perspective, yet as is always the case, we still require price action to prove our analysis, which to this point in time it has failed to do.

Trading Strategy

We canceled our last trade recommendation due to price breaking below the shallow range we were watching. Yet as per our review tonight it has now provided us with an opportunity to come in lower. So long as $3.50 support continues to hold strong from here. So the recommendation is to trade long at $4.09 with stops TBA. We will manage the position using a trailing stop.

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